Answer:
1 - Amount to be capitalized as patent is $118,000
2 - Amount to be reported as research and development expense is $6,060,000
Explanation:
1. - Amount to be capitalized as patent is $118,000
Legal fees for patent application -------------------------$79,000
Legal fees for successful defense of new patent -- $39,000
Total ---------------------------------------------------------------- $118,000
2. - Amount to be reported as research and development expense is $6,060,000
Basic research to develop the technology ---- $3,900,000
Engineering design work ---------------------------- $1,180,000
Development of a prototype ----------------------- $590,000
Testing and modification of the prototype ---- $390,000
Total -------------------------------------------------------- $6,060,000
