PA9-1 Computing Acquisition Cost and Recording Depreciation under Three Alternative Methods [LO 9-2, LO 9-3]

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	$	9,500		$	38,700		$	22,500
Installation costs		800			2,600			1,700
Renovation costs prior to use		600			2,200			2,700
Repairs after production began		600			600			1,200

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: (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

	Estimates
Machine	Life	Residual Value				Depreciation Method
A	5 years		$	1,500		Straight-line
B	20,000 hours			1,100		Units-of-production
C	10 years			1,900		Double-declining-balance

Cost of Machine