a. Research
and development costs of $20,000 were incurred. The research was conducted to
discover a new product to sell to customers in future years. A product was
successfully developed, and a patent for the new product was granted during
2008. Erin is unsure of the period benefited by the research but believes the
product will result in increased sales over the next five years.

b. Legal
costs and application fees of $10,000 for the patent were incurred on January
1, 2008. The patent was granted for a life of 20 years.

c. A patent
infringement suit was successfully defended at a cost of $8,000. Assume that
all costs were incurred on January 1, 2009.

Required

Determine how the costs in (a) and (b) should be presented
on Erin’s financial statements as of December 31, 2008. Also determine the
amount of amortization of intangible assets that Erin should record in 2008 and
2009.