Craft Corp. acquired all of the common stock of Pitts Co. in 2019. Pitts maintained its incorporation. Which of Craft's account balances would vary between the equity method and the initial value method?
A) Goodwill, Investment in Pitts Co., and Retained Earnings.
B) Expenses, Investment in Pitts Co., and Equity in Subsidiary Earnings.
C) Investment in Pitts Co., Equity in Subsidiary Earnings, and Retained Earnings.
D) Common Stock, Goodwill, and Investment in Pitts Co.
E) Expenses, Goodwill, and Investment in Pitts Co.

Question

Quizplus · Accepted Answer

Under the equity method, the "Investment in Pitts Co." account is adjusted for Craft's share of Pitts' earnings and dividends, affecting "Equity in Subsidiary Earnings" and "Retained Earnings." The initial value method does not adjust for these changes.