Early in Year 2, Merle Enterprises undertook activities in search of better ways of delivering accounting handouts to students at a cost of $280,000. Merles primary commercial activities involve accounting educational services to students at several universities. The improved accounting handout delivery service research produced ideas that Merle converted into patents at an additional cost of $20,000. Analysts reliably estimate the patents are worth $4,500,000. The patents were granted on August 31, Year 2, and have an estimated useful economic life of 10 years from that date.

Required:

$__________ What Research & Development Expense will appear in Merles income statement for Year 2?

$__________ At what carrying value will these patents appear in Merles balance sheet on December 31, Year 3?