E$8-36.$ 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 $$2,100,$ but Holthausen believes

that the fair value is $$280,000.$ 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 $20$ years.

The registration of the trademark for the Leftwich name is scheduled to expire in $15$ years.

However, the Leftwich brand name, which Holthausen believes is worth $$700,000,$ 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 five$-$year noncompetition agreement that prevents him from developing

competing products. Holthausen paid the scientist $$420,000$ 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?