Entity Framework 7 In Memory Database - Unit Testing using xUnit
I don't know xUnit, but in other testing frameworks you can reuse a single in-memory database in multiple test cases, by annotating the text cases (or rather, the entire test class) transactional. That is, the database manipulations within the test cases will be automatically rolled back after leaving the scope of the methods. That way tests can run faster, thanks to not recreating a full text database repeatedly. I would hope a similar concept exists in xUnit too, and research that.

If no such feature exists, your approach seems fine, but Initialize is a bit too generic of a name, I would call it RecreateDatabase instead to make it more clear what it does. Or, actually, other frameworks use annotation like @Before for this kind of purpose, instead of an explicit method call.

Lastly, the test in the second example is a bit weak. You only get that the first item is what you inserted. I suggest to either add a test to verify that there is only 1 item, or require it using GetAll like you did in the other test case.