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 $ 4,200,000 Engineering design work 1,220,000 Development of a prototype device 620,000 Testing and modification of the prototype 420,000 Legal fees for patent application 82,000 Legal fees for successful defense of the new patent 42,000 Total $ 6,584,000 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 Syste

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: 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