Identifying and Accounting for Intangible Assets
On the first day of the year, Holthausen Company acquired the assets of Leftwich Company including several intangible assets. These
include a patent on Leftwich's primary product, a device called a plentiscope. Leftwich carried the patent on its books for $ but
Holthausen believes that the fair market value is $ The patent expires in seven years, but competitors can be expected to
develop competing patents within three years. Holthausen believes that, with expected technological improvements, the product is
marketable for at least years.
The registration of the trademark for the Leftwich name is scheduled to expire in years. However, the Leftwich brand name, which
Holthausen believes is worth $ could be applied to related products for many years beyond that.
As part of the acquisition, Leftwich's principal researcher left the company. As part of the acquisition, he signed a fiveyear
noncompetition agreement that prevents him from developing competing products. Holthausen paid the scientist $ to sign the
agreement.
a What amount should be capitalized for each of the identifiable intangible assets?
b What amount of amortization expense should Holthausen record the first year for each asset?
Round to the nearest dollar.
