Satellite Systems modified its model Z2 satellite to incorporate a new communication device. The company made the following expenditures: Basic research to develop the technology - $3,800,000, Engineering design work - $1,160,000, Development of a prototype device - $580,000, Testing and modification of the prototype - $380,000, Legal fees for patent application - $78,000, Legal fees for successful defense of the new patent - $38,000. Total - $6,036,000. During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all the above as costs of the patent. Management contends that the device represents an improvement of the existing communication system of the satellite and, therefore, should be capitalized. Determine the amount Satellite Systems should capitalize to the Patent account in the balance sheet?