Cost of Intangibles – After securing lease commitments from several major stores, Silver Springs Shopping Center, Inc., was organized and built a shopping center in a growing suburb. The shopping center would have opened on schedule on January 2, 2008 if it had not been struck by a severe tornado in December; it opened for business on October 2, 2008. All the additional construction costs incurred as a result of the tornado were covered by insurance. In July 2007 in anticipation of the scheduled January opening, a permanent staff was hired to promote the shopping center, obtain tenants for the uncommitted space, and manage the property. A summary of some of the costs incurred in 2007 and the first nine months of 2008 follows:

The promotional advertising campaign was designed to familiarize shoppers with the center. Had the company known in time that the center would not open until October 2008, it would not have made the 2007 expenditure for promotional advertising. The company had to repeat the advertising in 2008.

All the tenants who had leased space in the shopping center at the time of the tornado accepted the October occupancy date on condition that the monthly rental charges for the first nine months of 2008 be canceled.

Required

Explain how the company should treat each of the costs for 2007 and the first nine months of 2008. Give the reasons for each treatment.