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Indicate the effect on the balance sheet

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Problem - Effect of Valuation Method for Nonmonetary Asset on Balance Sheet and Income Statement - Assume Walmart acquires a tract of land on January 1, 2016, for $100,000 cash. On December 31, 2016, the current market value of the land is $150,000. On December 31, 2017, the current market value of the land is $120,000. The firm sells the land on December 31, 2018, for $180,000 cash.

Required - lgnore income taxes. Indicate the effect on the balance sheet and income statement of the preceding information for 2016, 2017, and 2018 under each of the following valuation methods (Parts a-c).

a. Valuation of the land at acquisition cost until sale of the land (Approach 1)

b. Valuation of the land at current market value and including market value changes each year in net income (Approach 2)

c. Valuation of the land at current market value but including unrealized gains and losses in accumulated other comprehensive income until sale of the land (Approach 3)

d. Why is retained earnings on December 31, 2018, equal to $80,000 in all three cases despite the reporting of different amounts of net income each year?

Reference no: EM132893017

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