MHLV a luxury product company, is interested in possibly acquiring an interest in Chrior, another luxury consumer goods company. The CFO of MHLV has been in negotiations and has presented you- the accountant- with three options that have been proposed. The CFO would like to know what the impacts would be for each of the potential acquisition options. The CFO would like a memo analyzing your opinion on the possible reporting implications of each of the options.

MHLV is considering one of the following options in order to acquire Chrior another company.

1. Buy all of the net assets of Chrior for $500 million.

2. Buy 100% of the shares of Chrior for $400 million

3. Buy 50% of the shares for $150 million and buy 10,000 convertible securities for $300 million. Maximum 10,000 shares could be issued.

Presently, Chrior has 5,000 shares outstanding and the net assets of Chrior have a book value of $350 million. The 5,000 shares are owned by one shareholder.