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.

By the end of the first year, each machine had been operating 8,000 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 B Machine C Cost of the asset Installation costs Renovation costs prior to use Repairs after production began $9,000 e00 $38.200 2.100 1.700 600 $22,000 1,200 2,200 700 500 Estimates Machine Life Residual Value Depreciation Method 4 years 30.000 hours 10years $1.000 4500 1,400 Straight-line Units-ofproduction Double-declining-balance