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Faithful Enterprises Inc. developed a new machine for manufacturing baseballs. Because the machine is considered very valuable, the company had it patented. The following expenditures

Faithful Enterprises Inc. developed a new machine for manufacturing baseballs. Because the machine is considered very valuable, the company had it patented. The following expenditures were incurred in developing and patenting the machine.

Purchases of special equipment to be used solely for development of the new machine

P 2,730,000

Research salaries and fringe benefits for engineers and scientists

256,500

Cost of testing prototype

354,000

Legal costs for filing for patent

190,500

Fees paid to government patent office

37,500

Drawings required by patent office to be filed with patent application

70,500

Faithful elected to amortize the patent over its legal life. At the beginning of the second year, Faithful Enterprises paid P360,000 to successfully defend the patent in an infringement suit. At the beginning of the fourth year Faithful determined that the remaining estimated useful life of the patent was five years. The carrying amount of the patent at the end of fourth year is

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