During November and December of last year, Tommy's Inc., incurred the following expenses to investigate the feasibility of opening a new restaurant in town:
Expenses to do a market survey $3,800
Expenses to identify potential suppliers of goods $2,000
Expenses to identify a proper location $1,000
Explain the proper treatment of these expenses under the following scenarios:
1. Tommy's Inc., already owns another restaurant in town and is wanting to expand. Tommy's Inc. opens the new restaurant in February of the current year.
2. Assume that Tommy's Inc. is in the book selling business and feels that its bookstore business is not making a high enough return and it wants to move into the restaurant business. It opens the restaurant in February of the current year.
3. Same as #2 except Tommy's decides against opening a restaurant after getting back the results of the investigation.