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  • 5 years ago

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

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  1. anonymous
    • 5 years ago
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    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.

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