Racer Corp

question 35

Multiple Choice

Racer Corp. acquired all of the common stock of Tangiers Co. in 2011. 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.

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Definitions:

Cash Receipts

The collection of money, typically in the form of cash or checks, received by a business during its operating activities.

Cash Payments

Transactions involving the outflow of cash to settle obligations or purchase goods and services.

Control Environment

The overall attitude of management and employees about the importance of controls.

Internal Control Structure

A set of processes and procedures implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.