Walmart (WMT) acquires a tract of land on January 1, 2009, for $100,000 cash. On December 31, 2009, the current market value of the land is $150,000. On December 31, 2010, the current market value of the land is $120,000. The firm sells the land on December 31, 2011, for $180,000 cash.

Required

Ignore income taxes. Using the analytical framework discussed in the chapter, indicate the effect of the preceding information for 2009, 2010, and 2011 under each of the following valuation methods (Parts a–c).

a. Valuation of the land at acquisition cost until sale of the land.

b. Valuation of the land at current market value but including unrealized gains and losses in accumulated other comprehensive income until sale of the land.

c. Valuation of the land at current market value and including market value changes each year in net income.

d. Why is retained earnings on December 31, 2011, equal to $80,000 in all three cases despite the reporting of different amounts of net income each year?