The Pelican Partnership was formed on August 1 of the current year and admitted Morlan and Merriman as equal partners on that date. The partners both con tributed $300,000 of cash to establish a children's clothing store in the local mall. The partners spent August and September buying inventory, equipment, supplies, and adver tising for their "Grand Opening" on October 1. The partnership will use the accrual method of accounting. The following are some of the costs incurred during Pelican's first year of operations.
Legal fees to form partnership.......... $ 8,000
Advertising for “Grand Opening” .......... 18,000
Advertising after opening ........... 30,000
Consulting fees for establishing accounting system... 20,000
Rent, at $2,000 per month............... 10,000
Utilities, at $1,000 per month............ 5,000
Salaries to salesclerks (beginning in October)...... 50,000
Payments to Morlan and Merriman for services
($6,000 per month each for three months). ....... 36,000
Tax return preparation expense.......... 12,000
In addition, on October 1, Pelican purchased all of the assets of Granny Newcombs, Inc.
Of the total purchase price for these assets, $200,000 was allocated to the Granny New combs trade name and logo.
Determine how each of the listed costs is treated by Pelican, and identify the period over which the costs can be deducted, if any.