AP8-3 Computing a Basket Purchase Allocation, and Recording Depreciation under Three Alternative Methods (P8-4) At the beginning of the year, Labinski Inc, bought three used machines from Santoro Corporation for a total cash price of $62,000. Transportation costs on the machines were $3,000. The machines were immediately overhauled and installed, and started operating. The machines were different; therefore, each had to be recorded separately in the accounts. An appraiser was requested to estimate their market value at the date of purchase (prior to the overhaul and installation). The carrying amounts shown on Santoro's books are also available. The carrying amounts, appraisal results, installation costs, and renovation expenditures follow: Machine A Machine B Machine C Carrying amount on Santoro's books $10,500 $28,000 $26.000 Appraisal value 11,500 32,000 28,500 Installation costs 800 1.100 1,100 Renovation costs prior to use 600 1.400 1,600 By the end of the first year, each machine had been operating 7,000 hours. Required: 1. Compute the cost of each machine by making a supportable allocation of the total cost to the three machines (round your calculations to two decimal places). Explain the rationale for the allocation basis used. 2. Prepare the entry to record depreciation expense at the end of year 1, assuming the following: Estimates Machine Residual Value Depreciation Method 4 years $1,000 Straight line 35,000 hours 2,000 Units of production 5 years 1,500 Double declining balance