Presented below are the components related to an office building that ABC Company is considering purchasing for SAR10,000,000. Component Useful Life Value Building structure 60-year life 5,400,000 Building engineering 30-year life 2,400,000 Building external works 30-year life 900,000 Instructions

(a) Compute depreciation expense for 2010, assuming that ABC uses component depreciation.

(b) Assume that the building engineering was replaced in 20 years at a cost of SAR2,600,000. Prepare the entry to record the replacement of the old component with the new component.