A furniture company buys back its sold items at ₹2,500 per item (having remaining useful life > 3 years at the time of purchase ).

Mr. Mohan had purchased a table and a sofa set costing ₹4,000 and ₹21,000 respectively, having useful life of 10 years each. After 5 years he returns back these two pieces of furniture. The total estimated annual depreciation on the two furniture pieces is :

₹2,000

Cost of table = ₹4000

Cost of sofa set = ₹21000

Total cost = ₹25000

Buy-back value per item = ₹2500

Number of items = 2

Total scrap (buy-back) value = ₹5000

Useful life of each item = 10 years

Total depreciable amount:

$25000 - 5000 = 20000$

Annual depreciation (straight-line method):

$\frac{20000}{10} = 2000$

final answer: Total estimated annual depreciation is ₹2000