The Heron Partnership was formed on July 1 of the current year and admitted Carl and Megan as equal partners on that date. The partners contributed $200,000 cash each to establish a children’s clothing store in the local mall. The partners spent July and August buying inventory, equipment, supplies, and advertising 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 Heron’s first year of operations. In addition, Heron purchased all of the assets of Granny Newcombs, Inc. Of the total purchase price for these assets, $60,000 was allocated to the Granny Newcombs trade name and logo.
Determine how each of the above costs is treated by the partnership, and identify the period over which the costs can be deducted, if any.
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