On December 31, 2020, Scarce Company showed the following account for machinery that it has assembled for own use.

MACHINERY
Cost of dismantling old machine 20,000	Cash proceeds from sale of old machine 14,000
Raw materials used 600,000	Depreciation for 2020 (10% of 1,286,000) 128,600
Labor in construction 400,000
Cost of installation 60,000
Materials spoiled in trial run 30,000
Profit on construction 100,000
Purchase of machine tools 90,000

An analysis of the details in the account disclosed the following:

1. The old machine, which was removed in the installation of the new one had been fully depreciated.

2. The discount received on the payment of materials used in construction totaled P40,000 and this was reported in the purchase discount account.

3. The factory overhead account shows a balance of P2,500,000 for the year ended December 31, 2020. This balance exceeds normal overhead on plant activities by P150,000 and is attributable to machine construction.

4. A profit was recognized on construction for the difference between cost incurred and the price at which the machine could have been purchased.

5. Machine tools have a useful life of 3 years.

6. Machinery has a useful life of 10 years and was used for production beginning September 1, 2020.

Required:

a. Determine the cost of the machinery.

b. Prepare journal entries to adjust the machinery account on December 31, 2020.

Show computations.