One of the Methods That the Internal Revenue Service Allows

Multiple Choice

One of the methods that the Internal Revenue Service allows for computing depreciation of certain business property is the sum-of-the-years'-digits method. If a property valued at C dollars has an estimated useful life of N years and a salvage value of S dollars, then the amount of depreciation Dn allowed during the nth year is given by where S_N is the sum of the first N positive integers representing the estimated useful life of the property. Thus, If office furniture worth $7,300 is to be depreciated by this method over N = 11 years and the salvage value of the furniture is $700, find the depreciation for the third year by computing D₃ .

A) $2,700
B) $900
C) $700
D) $450