At the beginning of the year, Young Company bought three used machines from Vince, Inc. 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
Amount paid for asset	$7,600	$25,600	$9,300
Installation costs	200	600	500
Renovation costs prior to use	1,500	1,200	1,000
Repairs after production began	400	350	325

By the end of the first year, each machine had been operating 7,000 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:

	Estimates
Machine	Life	Residual Value	Depreciation Method
A	5 years	$ 600	Straight-line
B	40,000 hours	1,000	Units-of-production
C	6 years	2,000	Double-declining-balance

TIP:	Remember that the formula for double-declining-balance uses cost minus accumulated depreciation (not residual value).