Question

For tax purposes, businesses frequently
depreciate equipment. Two methods of depreciation are
straight-line depreciation and sum-of-the-years’-digits.
Suppose that a college student buys a $3000 computer to
start a business that provides Internet services. This student
estimates the life of the computer at 4 years, after
which its value will be $200. The difference between
$3000 and $200, or $2800, may be deducted from the student’s
taxable income over a 4-year period.
In straight-line depreciation, equal portions of $2800
are deducted each year over the 4 years. The sum-of-theyears’-
digits m

Answer 1

method calculates depreciation differently.
For a computer having a useful life of 4 years, the sum of
the years is computed by
1 1 2 1 3 1 4 5 10.