Alladin Company purchased a large piece of equipment on October $1,2023.$ The following infor mation relating to the equipment was gathered at the end of October:

$$60,000$

Price

$2/10,$ n$/30$

Credit terms

$$4,800$

Engineering costs

Maintenance costs during regular production operations

$$8,500$

It is expected that the equipment could be used for $12$ years, after which the salvage value would be zero.

Alladin intends to use the equipment for only $10$ years, however, after which it expects to be able to sell it for $$3,100.$ The equipment was delivered on October $1$ and the invoice for the equipment was paid on October $9,2023.$ Alladin uses the calendar year to prepare financial statements. Alladin follows IFS fOr financial statement purposes.

Instructions

a$.$ Calculate the depreciation expense for the years indicated using the following methods. $($Do not round intermediate calculations but round final amounts to the nearest dollar.$)$

$1.$ Straight$-$line method for $2023$

$2.$ Sum$-$of$-$the$-$years $-$digits method for $2024$

$3.$ Double$-$declining$-$balance method for $2023$

b$.$ The CEO of Alladin tells you that the company wants a stable level of income, because it plans to expand in the future and does not want to appear overly risky to potential lenders. He asks you, the company's newly hired CPA, to recommend a depreciation method that will best achieve this goal.

You know that, because the equipment is new, it should have low repair and maintenance costs for the next few years. However, the repair and maintenance costs are likely to increase steadily during years $3$ to $10$ of the life of the equipment. Which method would you recommend? Explain.