On December 31, 2020, Scarce Company showed the following account for machinery that it has assembled for own use. Machinery Cash proceeds from sale of old machine Cost of dismantling old machine...

Extracted text: On December 31, 2020, Scarce Company showed the following account for machinery that it has assembled for own use. Machinery Cash proceeds from sale of old machine Cost of dismantling old machine 20,000 Raw materials used Labor in construction Cost of installation Materials spoiled in trial run Profit on construction Purchase of machine tools 14,000 600,000 400,000 | Depreciation for 2020 60,000 30,000 100,000 90,000 10% of P1,286,000 128,600 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.