In: Accounting
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