On January 1, 2018, Dayton also purchased a patent for $2,500,000 and a franchise from Iron Drill Company for $400,000. The patent's legal life is 20 years but the company estimated that the patent's useful life would only be 5 years from the date of acquisition. The franchise is for an indefinite time period and gives Dayton the exclusive rights to sell Iron Drill's products in a particular territory. Apart from the aforesaid purchases, Dayton also incurred research costs of $500,000 on December 31, 2018 in developing a new product.

Explain how Dayton should recognise the above items. Where applicable, show the respective accounting entries for 2018 and 2019.