Pearl Inc. develops and markets computer software. During 2007, one of Pearl's engineers began developing a new and very innovative software product. On July 1, 2008, a team of Pearl engineers determined that the software product was technologically feasible. Pearl engineers continued to ready the software for general release and in January 2009, the first product sales were made. Total costs incurred follow:

Required:
1. How should Pearl account for the costs incurred during 2007, and what is the rationale for your answer?
2. How should Pearl account for the costs incurred during 2008? If your answer differs from your answer in requirement 1, explain why.

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2007 2008 $3,200,000 $3,600,000 (evenly throughout the year)