Q2. Companies changed estimates for reserves, residual value, and life.

Q2a. On Jan 1, 2015, Knapp Co. bought a coal mine for $250,000. Knapp estimated the mines reserves at 5 million tons, and the residual value of the land $50,000. In Jan 2019 after extracting 2.5 million tons, Knapp revised the mines total reserves down from 5 to 4 million tons. Knapp also revised the expected residual value down from $50,000 to $30,000. Determine the cost per ton of coal as at Jan 1, 2015 and at Jan 1, 2019.

Q2b. On January 1, 2016, Hess Co. purchased a patent for $600,000. The patent had an estimated life of 15 years. The patent had no residual value and was amortized on a straight-line basis. However, during 2019, Hess determined that the patents economic benefits would not last longer than nine years from its date of acquisition. Calculate the patents book value at the end of the financial year on Dec 31, 2019.