Ayayai Company is a U$.$S$.-$based company that designs and builds compressors for large HVAC units. Ayayai decides to build a new

plant in China, its first attempt at doing business internationally. During its start$-$up phase, Ayayai incurs $$2023000$ of start$-$up costs

including $$1011500$ in legal fees, $$708050$ to introduce its product, and another $$303450$ in state fees to the Chinese government to

organize the new business entity. Ayayai Company's CEO fully expects the company to become profitable during its $3$rd year of

operations. How should Ayayai Company account for these costs?

Ayayai can capitalize $$708050$ related to introducing its product, but the other costs must be expensed as incurred.

Ayayai must expense all $$2023000$ start$-$up costs as incurred.

Ayayai can capitalize $$1011500$ in legal fees, but the other costs must be expensed as incurred.

Ayayai can capitalize $$1314950$ related to legal and state fees, but the other costs must be expensed as incurred.