tion under Three LO8-2,8-3 excel P8-4 building in 2015. 4. Explain the effect of depreciation on cash flows. Computing a Basket Purchase Allocation, and Recording Depreciation under Alternative Methods (AP8-3) At the beginning of the year. Wong's Martial Arts Centre bought three used fitness machi Hangar Inc. for a total cash price of $38,000. Transportation costs on the machines we machines were immediatelu overhauled and installed, and started operating. The machine different: therefore, each had to be recorded separately in the accounts. An appraiser was to estimate their market value at the date of purchase (prior to the overhaul and installati carrying amounts shown on Hangar's books are also available. The carrying amounts, appraisal results, installation costs, and renovation expenditures follow: d fitness machines from chines were $2,000. The The machines were opraiser was requested land installation). The Carrying amount on Hangar's books Appraisal value Installation costs Renovation costs prior to use Machine A $8,000 9,500 300 2,000 Machine B $29,000 32,000 500 400 Machine C $6,000 8,500 200 600 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 to the 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 followinly. Estimates Machine Life Residual Value Depreciation Method A 5 years $1,500 Straight line B 40,000 hours 900 Units of production 4 years 2,000 Double declining balance