In 2011 Space Technology Company modified its model Z2 satellite to incorporate a new communication device.The company made the following expenditures:Basic research to develop the technology$2000000Engineering design work680000Development of a prototype device300000Acquisition of equipment60000Testing and modification of the prototype200000Legal and other fees for patent application on the new communication system40000Legal fees for successful defense of the new patent20000 Total$3300000The equipment will be used on this and other research projects. Depreciation on the equipment for 2011 is $10000.During your year-end review of the accounts related to intangibles you discover that the company has capitalized all of the above as costs of the patent. Management contends that the device simply represents an improvement of the existing communication system of the satellite and therefore should be capitalized.Required:Prepare correcting entries that reflect the appropriate treatment of the expenditures.