On August 1, 2010, Colorite Corp. acquired 10,000 of the outstanding shares of Brown Co. On January 2, 2011, Colorite acquired an additional 20,000 shares of Brown Co., which brought the total ownership to 30,000 shares. Using the normal guidelines for percentages of ownership and assuming that Brown Co. had 100,000 shares outstanding during 2010 and 2011, Colorite Corp. should account for the investment in Brown Co. by using the

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Colorite acquired 10% of Brown Co. in 2010 and 20% in 2011. The equity method should be used in 2011. Since the investment was originally accounted for using the cost method, the investment account should be retroactively adjusted to the equity method at the beginning of 2011.