Newman Properties Inc. completed construction of a new shopping center in July 2011. During the first six months of 2011, Newman spent $550,000 for salaries, preparation of documents, travel, and other similar activities associated with securing tenants for the center. Newman was successful (Nordstrom, Best Buy, and Office Depot will be tenants) and the center will open on August 1 with all its stores rented on four-year leases. The rental revenue that Newman expects to receive from the current tenants is $8,500,000 per year for four years. The leases will be renegotiated at the end of the fourth year. The accountant for Newman wonders whether the $550,000 should be expensed in 2011 or whether it should be initially recorded as an asset and matched against revenues over the four-year lease term.
Required:
Write a short statement indicating why you support expensing the $550,000 in the current period or spreading the expense over the four-year lease term.