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E 8 - 3 6 . Identifying and Accounting for Intangible Assets On the first day of the year, Holthausen Company acquired the assets of
E Identifying and Accounting for Intangible Assets
On the first day of the year, Holthausen Company acquired the assets of Leftwich Company, in
cluding several intangible assets. These include a patent on Leftwich's primary product, a device
called a plentiscope. Leftwich carried the patent on its books for $ but Holthausen believes
that the fair value is $ The patent expires in seven years, but competitors can be expected
to develop competing patents within three years. Holthausen believes that, with expected techno
logical improvements, the product is marketable for at least years.
The registration of the trademark for the Leftwich name is scheduled to expire in years.
However, the Leftwich brand name, which Holthausen believes is worth $ could be ap
plied to related products for many years beyond that.
As part of the acquisition, Leftwich's principal researcher left the company. As part of the
acquisition, he signed a fiveyear noncompetition agreement that prevents him from developing
competing products. Holthausen paid the scientist $ to sign the agreement.
a What amount should be capitalized for each of the identifiable intangible assets?
b What amount of amortization expense should Holthausen record the first year for each asset?
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