f CaT 4. Explain the effect of depreciation Computing a Basket Purchase Allocation, and Recording Depreciation u Alternative Methods (AP8-3) nder Three At the beginning of the year, Wong's Martial Arts Centre bought three used fitness m machines were immediately overhauled and installed, and started operating. The machine different; therefore, each had to be recorded separately in the accounts. An appraiser wae Hangar Inc. for a total cash price of $38,000. Transportation costs on the machines were 824 s were requested on). The to estimate their market value at the date of purchase (prior to the overhaul and installatic carrying amounts shown on Hangar's books are also available. The carrying amounts, app results, installation costs, and renovation expenditures follow: Machine B Machine A $8,000 9,500 Machine C Carrying amount on Hangar's books Appraisal value installation costs Renovation costs prior to use $29,000 32,000 500 400 $6,000 8,500 200 600 300 2,000 By the end of the first year, each machine had been operating 8,000 hours. Required: 1. Compute the cost of each machine by making a supportable allocation of the total cost tothe three machines. Explain the rationale for the allocation basis used 2. Prepare the entry to record depreciation expense at the end of year 1, assuming the followaug Estimates Machine Life Residual Value $1,500 A 5 years B 40,000 hours C 4years Depreciation Method Straight line Units of production Double declining balance 400 2,000