At the beginning of the year, Grillo Industries bought three used machines from Freeman Incorporated. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts. Machine A Machine B Machine C
Cost of the asset $10,600 $39,800 $23,600
Installation costs 850 3,700 2,800
Renovation costs
prior to use 650 3,300 3,800
Repairs after production
began 500 700 2,300
By the end of the first year, each machine had been operating 8,000 hours.
Required:
1. Compute the cost of each machine.
2. Prepare the journal entry to record depreciation expense at the end of year 1, assuming the following:
Estimates
Machine Life Residual Value Depreciation Method
A 5 years $1,600 Straight-line
B 20,000 hours 1,200 Units-of-production
C 10 years 2,000 Double-declining-balance
3. Record the depreciation expense for the three used machines at the end of year 1.