Hoping someone can clarify this problem/answer for me:
Gear Inc. purchased equipment costing $420,000 with an estimated residual value of $20,000 and a useful life of eight years on May 1, 2009. Gear Inc. is a calendar-fiscal year and computes depreciation to the nearest month (the firm does not use a convention approach to fractional depreciation).
In the table below provide the depreciation for the equipment for fiscal years 2009 and 2010 under both the sum-of-years' digits (SYD) method and the double declining balance (DDB) method. Place your amounts rounded to the nearest dollar in the appropriate columns.
This is the answer for SYD:
2009: (8/12)(8/36)($420,000 − $20,000) = $59,259
(eight years remain at beginning of first year of asset service life)
2010: (4/12)(8/36)($420,000 − $20,000) + (8/12)(7/36)($420,000 − $20,000) = $81,481
My question is why did they multiply by 4/12 in 2010? I understand that it was purchased in May so thats 8/12 and 4 months remain to make a year but wouldn't you have the equipment for a full year in 2010?
.