Explain how each of the costs for 2011 and the first 9 months of 2012 should be treated in the… 1 answer below »

(Accounting for Pre-Opening Costs) After securing lease commitments from several major stores, Auer Shopping Center, Inc. was organized and built a shopping center in a growing suburb. The shopping center would have opened on schedule on January 1, 2012, if it had not been struck by a severe tornado in December. Instead, it opened for business on October 1, 2012. All of the additional construction costs that were incurred as a result of the tornado were covered by insurance. In July 2011, in anticipation of the scheduled January opening, a permanent staff had been 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 2011 and the first nine months of 2012 follows.

2011

January 1, 2012
through
September 30, 2012

Save your time - order a paper!

Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines

Order Paper Now

Interest on mortgage bonds

$720,000

$540,000

Cost of obtaining tenants

300,000

360,000

Promotional advertising

540,000

557,000

The promotional advertising campaign was designed to familiarize shoppers with the center. Had it been known in time that the center would not open until October 2012, the 2011 expenditure for promotional advertising would not have been made. The advertising had to be repeated in 2012. All of 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 9 months of 2012 are canceled.

Instructions

Explain how each of the costs for 2011 and the first 9 months of 2012 should be treated in the accounts of the shopping center corporation. Give the reasons for each treatment.

 

Looking for a Similar Assignment? Let us take care of your classwork while you enjoy your free time! All papers are written from scratch and are 100% Original. Try us today! Use Code FREE15