before each of its two big semiannual sales nordstrom prints and mails advertisement 564026

Before each of its two big semiannual sales, Nordstrom prints and mails advertisements to its preferred customers and also prints and installs in its stores a variety of signs announcing the sales. Assume that these expenditures cost $2 million per year. Clearly, Nordstrom management believes that spending $2 million to promote the semiannual sales will increase gross margin (sales revenues less cost of sales) by at least $2 million. However, it cannot establish a causal link between any specific promotional expenditure and the sale of a specific item. As a result, Nordstrom treats the promotion costs as period expenses in the period incurred:

To record $2 million of advertising and promotion costs.