Silver Production (SP) has a 31 December year end. On 1 January 2022, SP bought a new equipment (equipment A) to produce laboratory goggles. It paid $225,000 cash and issued 15,000 shares of stock at $35/share (market value) to pay for the purchase. The useful life of equipment A is estimated to be 3 years or 880,000 goggles and its estimated residual value is $90,000. SP has an expected production of 350,000 goggles in 2022 and 270,000 goggles in 2023.

(a) What is the purchase price of equipment A?

(b) Calculate the 2022 and 2023 depreciation expense of equipment A using:

(i) the straight-line depreciation method, and (ii) the unit-of production depreciation method

(b) Larry Co. offers to buy equipment A from SP at $350,000 at the end of 2023. In light of these facts, discuss which depreciation method should be used by SP.