Custom Depreciation Methods and Short Years

During a short year, the system determines the annual depreciation by multiplying the annual percentage in the custom method table by the depreciable basis. This amount is further reduced by the short-year fraction. The system divides the short-year amount equally among the months (or periods) in the short year.

Using the Custom Depreciation Method example , assume the organization had a short year because it began operations in June 2007. The calculations must be modified to take into account the short year. Using a monthly accounting cycle, the first-year depreciation would equal 7/12ths of the annual amount (June to December). The balance would be recovered in the year following the last scheduled recovery period.

Taking into account the short year, the percentage for each year would yield these results:

Year	Calculation	Depreciation
1	$17,000 x 14.58% x 7/12	$ 1,445.85
2	$17,000 x 38%	6,460.00
3	$17,000 x 37%	6,290.00
4	$17,000 x 10.42%	1,771.40
5	$17,000 x 14.58% x 5/12	1,032.75
	Total	$17,000.00