On the first day of 2016, 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 $1,500, but Holthausen believes that the fair market value is $200,000. 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 20 years The registration of the trademark for the Leftwich name is scheduled to expire in 15 years. However, the Leftwich brand name, which Holthausen believes is worth $500,000, 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 five-year noncompetition agreement that prevents him from developing competing products. Holthausen paid the scientist $300,000 to sign the agreement.
a. What amount should be capitalized for each of teh identifiable intangible assets?
b. What amount of amortization expense should Holthausen record in 2016 for each asset?
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