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The business signs a ten-year contract with the inventor of a secret process that it will use in its manufacturing operations. As an incentive to agree to the contract, the business immediately pays the inventor $1,000,000. In addition, the business agrees to pay the inventor a royalty equal to five percent of its sales revenue from these products over the next ten years.
a. What entry should be made for the initial payment to the inventor?b. What adjusting entry should be made one year later?
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