Racer Corp.acquired all of the common stock of Tangiers Co.in 2016.Tangiers maintained its incorporation.Which of Racer's account balances would vary between the equity method and the initial value method?
A) Goodwill, Investment in Tangiers Co., and Retained Earnings.
B) Expenses, Investment in Tangiers Co., and Equity in Subsidiary Earnings.
C) Investment in Tangiers Co., Equity in Subsidiary Earnings, and Retained Earnings.
D) Common Stock, Goodwill, and Investment in Tangiers Co.
E) Expenses, Goodwill, and Investment in Tangiers Co.

Question

Quizplus · Accepted Answer

The account balances that vary between the equity method and the initial value method are Investment in Tangiers Co., Equity in Subsidiary Earnings, and Retained Earnings. Goodwill does not vary between the two methods as it is only recorded under the initial value method, and expenses and common stock are not affected by either method.