The Abdulla Company purchased a building that cost AED 520,000. The building was estimated to have 20,000 salvage value and 5 years of life.

Required:

a) (1.5 Marks) Determine depreciation for year 1 and year 2 and record the journal entry using the following methods:

Sum of the years digits method

Straight line method

b) (0.5 Mark) What is the monthly depreciation for each method?

Formula:

- Sum of the years digits = Step 1 Calculate the Sum of the years digits

Step 2 Use the fraction of each year to determine depreciation.

- Straight line method = Cost salvage / years of useful life