Required information [The following information applies to the questions displayed below.] Satellite Systems modified its model Z2 satellite to incorporate a new communication device. The company made the following expenditures: Basic research to develop the technology Engineering design work Development of a prototype device Testing and modification of the prototype Legal fees for patent application Legal fees for successful defense of the new patent Total $ 3,900,000 1,180,000. 590,000 390,000 79,000. 39,000 $ 6,178,000 During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all costs of the patent. Management contends that the device represents an improvement of the existing communication system of the satellite and, therefore, should be capitalized. Required: 1. How much should Satellite Systems capitalize in the Patent account in the balance sheet? Patent costs capitalized Required information [The following information applies to the questions displayed below.] Satellite Systems modified its model Z2 satellite to incorporate a new communication device. The company made the following expenditures: Basic research to develop the technology Engineering design work Development of a prototype device Testing and modification of the prototype Legal fees for patent application Legal fees for successful defense of the new patent Total $ 3,900,000 1,180,000 590,000 390,000 79,000 39,000 $ 6,178,000 During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all costs of the patent. Management contends that the device represents an improvement of the existing communication system of the satellite and, therefore, should be capitalized. 2. How much should Satellite Systems report as research and development expense in the income statement? Research and development expense Required information [The following information applies to the questions displayed below.] Satellite Systems modified its model 22 satellite to incorporate a new communication device. The company made the following expenditures: Basic research to develop the technology Engineering design work Development of a prototype device. Testing and modification of the prototype Legal fees for patent application Legal fees for successful defense of the new patent Total $ 3,900,000 1,180,000 590,000 390,000 79,000 39,000 $ 6,178,000 During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all costs of the patent. Management contends that the device represents an improvement of the existing communication system of the satellite and, therefore, should be capitalized. 3. What are the basic criteria for determining whether to capitalize or expense intangible related costs? a. The costs of purchased intangible assets are usually b. The costs of internally developed intangible assets are usually