At the beginning of the year, Oakmont Company bought three used machines from American Manufacturing, Inc. 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 4,000 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 Amount paid for asset Installation costs Renovation costs prior to use Repairs after production began $19,600 300 100 220 $10100 500 300 900 $9,800 200 600 480 Estimates Machine Life Residual Value Depreciation Method 7 years 40.000 hours 4 years $1,100 900 2,000 Straight-line Units-of production Double-declining-balance