Question

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.

	Machine A			Machine B			Machine C
Amount paid for asset	$	21,500		$	12,000		$	11,700
Installation costs		1,250			600			500
Renovation costs prior to use		1,050			300			1,000
Repairs after production began		520			2,800			880

   By the end of the first year, each machine had been operating 4,000 hours.

Required:
1.	Compute the cost of each machine.

2.	Prepare the journal entry to record depreciation expense at the end of year 1, assuming the following: (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

	Estimates
Machine	Life	Residual Value				Depreciation Method
A	5 years		$	1,800		Straight-line
B	20,000 hours			1,700		Units-of-production
C	10 years			1,700		Double-declining-balance

Answer 1

1) Generally an assets is capitalized with the Cost of the asset plus installiaton cost, Renovation cost.
Cost incurred for Repairs after production began should be a Operating expenses doesn't include
as part of cost of the asset for capitalisation.
so Cost of machine A is = (21500+1250+1050) = S 23,800/.
Cost of Machine B is = (12000+600+300) = S 12,900/.
Cost of Machine C is = (11700+500+1000) = S 13,200/.
2) Depreciation expenses
Machine -A
For Machine - A annual depreciation is = (Cost - Residual value)/Life = (23800-1800) / 5
For Machine - A depreciation expense for year 1 is = $ 4,400/.