Problem $2\mathrm{.}14$:

Refer to Problem $2\mathrm{.}13($See below$)$

Assume that Walmart has accounted for the value of the land at acquisition cost and sells the land on December $31,2020,$ for a two$-$year note receivable with a present value of $$180,000$ instead of for cash. The note bears interest at $8\%$ and requires cash payments of $$100,939$ on December $31,2021$ and $2022.$ Interest rates for notes of this risk level increase to $10\%$ on December $31,2021,$ resulting in a market value for the note on this date of $$91,762.$

Ignore income taxes. Indicate the effect on the balance sheet and income statement of the preceding information for $2020,2021,$ and $2022$ under each of the following valuation methods.

a$.$ Valuation of the note at the present value of future cash flows using the historical market interest rate of $8\%($Approach $1)$

b$.$ 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 $2)$

c$.$Why is retained earnings on December $31,2022,$ equal to $$101,878$ in both cases despite the reporting of different amounts of net income each year?

Problem $2\mathrm{.}13$ for reference:

Assume Walmart acquires a tract of land on January $1,2018,$ for $$100,000$ cash. On December $31,2018,$ the current market value of the land is $$150,000.$ On December $31,2019,$ the current market value of the land is $$120,000.$ The firm sells the land on December $31,2020,$ for $$180,000$ cash.

Ignore income taxes. Indicate the effect on the balance sheet and income statement of the preceding information for $2018,2019,$ and $2020$ 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 $31,2020,$ equal to $$80,000$ in all three cases despite the reporting of different amounts of net income each year?