Question Assume Walmart acquires a tract of land on January 1, 2009 for$100,000 cash.On December 31, 2009, the current market value ofland is $150,000. On December 31, the current market value of landis $120,000. The firm sells the land on December 31, 2011 for$180,000 cash. Ignore income tax. Indicate the effects on thebalance sheet and income statement of the preceding information for2009, 2010, and 2011 under each of the following valuation methods(Part A-C). A. Valuation of the land at acquisition cost until saleof the land(Approach 1). B. Valuation of the land at current marketvalue but including unrealized gains and losses in accumulatedother comprehensive income until sale of land (Approach 2). C.Valuation of the land at current market value and including marketvalue changes each year in net income (Approach 3). D. Why isretained earnings on December 31, 2011, equal to $80,000 in allthree cases despite the reporting of different amount of net incomeeach year?
Question
Assume Walmart acquires a tract of land on January 1, 2009 for$100,000 cash.On December 31, 2009, the current market value ofland is $150,000. On December 31, the current market value of landis $120,000. The firm sells the land on December 31, 2011 for$180,000 cash. Ignore income tax. Indicate the effects on thebalance sheet and income statement of the preceding information for2009, 2010, and 2011 under each of the following valuation methods(Part A-C). A. Valuation of the land at acquisition cost until saleof the land(Approach 1). B. Valuation of the land at current marketvalue but including unrealized gains and losses in accumulatedother comprehensive income until sale of land (Approach 2). C.Valuation of the land at current market value and including marketvalue changes each year in net income (Approach 3). D. Why isretained earnings on December 31, 2011, equal to $80,000 in allthree cases despite the reporting of different amount of net incomeeach year?
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