Question: Yang Company had the following transactions related to its intangibles account. a. On January 1, 2016, Yang purchased Hollyhock Industries for $8,050,000. The book value of Hollyhock's net assets was $6,200,000 and the fair value of Hollyhock's net assets was the same, except for the Building account, which was deemed to be undervalued by $120,000 and the Inventory account, which was deemed to be overvalued by $10,000. b. In 2016, Yang finalized the development of a special hair-growth tonic. Throughout the year 2016, Yang spent $380,000 designing alternatives and putting the product through final testing and $220,000 on a machine that was used to mix the chemicals for the hair tonic. This machine cannot be used for other projects in Yang's business line. On July 1, 2016, Yang spent $155,000 in legal fees to register and secure the patent for the hair formula.
Required: 1. How much should Yang capitalize for each asset on its Balance Sheet? Ignore any depreciation or amortization costs.
2. How would Yang account for the machinery in part (b) if it had an alternative use outside of the current project?