Effect of valuation method for nonmonetary asset on balance sheet and income statement. Assume Target acquires a tract of land on Januaray 1, 2020 for $98,000 cash. On December 31, 2020, the current market value of the land is $156,000. On December 21, 2022, for $176,000 cash.

Assume that Target has accounted for the value of the land at acquisition cost and sells the land on December 31,2022, for a two-year note receivable with a present value of $176,000 instead of for cash. The note bears interest at 8% and requires cash payments of $98,695 on December 31, 2023 and 2024. Interests rates for notes of this risk level increase to 10% on December 31, 2023, resulting in a market value for the note on this date of $89,723. Ignoring income taxes, complete the following items.

(a) Assuming valuation of the note at the present value of future cash flows using

the historical market interest rate of 8% (Approach 1), indicate the dollar effect of

the information on net income for:

1. 2023

2. 2024

(b) Assuming valuation of the note at the present value of future cash flows,

adjusting the note to fair value upon changes in market interest rates and

including unrealized gains and losses in net income (Approach 2), indicate the

dollar effect of the information on net income for:

1. 2023

2. 2024