At the beginning of the year, CCZ Corporation bought three used machines from Pequita Compression Incorporated. The machines immediately were overhauled, installed, and started operating. Because the machines were different from each other, each was recorded separately in the accounts.

By the end of the first year, each machine had been operating 7,000 hours.
Required:
1. Compute the cost of each machine. Explain the rationale for capitalizing or expensing the various costs.
2. Give the journal entry to record depreciation expense at the end of year 1, assuming the following:

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Machine A Machine C Machine B $31,500 2,100 1,400 400 Cast of the asset Installation costs Renovation costs prior to use Repairs after production began $10,000 $22,000 800 1,600 700 1,600 600 500 Estimates Residual Value Depreciation Method Machine Life 4 years 33,000 hours 5 years $1,000 2,000 1,400 Straight-line Units-of-production Double-declining-balance