TRUE - FALSE (TRUE = A, FALSE = B) 7. Assets classified as Property. Plant and Equipment can be either acquired for use in operations, or acquired for resale. 8. When land with an old building is purchased as a future building site, the cost of removing the old building is part of the cost of the new building. Insurance on equipment purchased, while the equipment is in transit, is part of the cost of the equipment. 10. Avoidable interest is the amount of interest cost that a company could theoretically avoid if it had not made expenditures for the asset. Multiple Choice 11. Cotton Hotel Corporation recently purchased Emporia Hotel and the land on which it is located with the plan to tear down the Emporia Hotel and build a new luxury hotel on the site. The cost of the Emporia Hotel should be a. depreciated over the period from acquisition to the date the hotel is scheduled to be torn down. b. written off as a loss in the year the hotel is torn down. c. capitalized as part of the cost of the land, d. capitalized as part of the cost of the new hotel. 12 The debit for a sales tax properly levied and paid on the purchase of machinery preferably would be a charge to a. the machinery account. b. a separate deferred charge account. c. miscellaneous tax expense (which includes all taxes other than those on income). d. accumulated depreciation--machinery. Fences and parking lots are reported on the balance sheet as a. current assets b. land improvements. c. land. d. property and equipment. Mendenhall Corporation constructed a building at a cost of $14,000,000. Weighted- average accumulated expenditures were $5,600,000, actual interest was $560,000, and avoidable interest was $280,000. If the salvage value is $1,120,000, and the useful life is 40 years, depreciation expense for the first full year using the straight-line method is a. $329,000. b. $336,000 c. $357,000 d. $469,000