DURING YEAR1, COMPUTER CONSULTANTS, AN ACCRUAL BASIS TAXPAYER, PROVIDED CONSULTING SERVICES TO KATE ON AN ACCOUNT FOR 1000. KATE NEVER PAID THE AMOUNT, AND DURING YEAR 2 THE CREDIT MANGER IS INFORMED THAT KATE FILED FOR BANKRUPTCT. ALL UNSECURED CREDITORS ARE EXPECTED TO RECEIVE ONLY 30% OF THE AMOUNT DUE TO THEM. IN YEAR 3, COMPUTER CONSULTANTS RECEIVE A FINAL SETTLEMENT FOR 100. ON THE TAX RETURN , CONSULTANTS SHOULD DO WHAT

DEDUCT 900 IN YEAR 2

DEDUCT 700 IN YEAR 2 AND 200 IN YEAR 3

DEDUCT 500 IN YEAR 2 AND 400 IN YEAR 3

DEDUCT 900 IN YEAR 3