Company A acquires 100% stake in company B using debt and company B’s fmv of assets was 640 and liabilities 320. So when we consolidate the financial statements A’s assets will go up by 640, liabilities by 640 ( debt taken to buy B + B’s liability) and equity by 320. So the adjustment is not matching 640 = 640+320. Basically the question is when we use debt to buy equity (full control) what would be the appropriate adjustment
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So here the debt= fmv of asset – Lia.
i.e. 320. Therefore in consolidation debt Inc by 320 and also equity Inc by 320 and assets Inc by 640.