Question $8(1$ point$)$

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Inventory was acquired as part of a business combination that occurred at the end of the prior year. The inventory has a fair value greater than the carrying value. The inventory was sold in the current year. Which statement correctly explains the adjust required in the consolidation process.

The fair value difference is added to sales. The adjustment is required to record the sale of the inventory in the year.

The fair value difference is added to the inventory balance. The adjustment is required to ensure the fair value of the acquired inventory reflects in the inventory on the statement of financial position for the current year.

The fair value difference is added to the cost of sales. The adjustment is required to reflect the fair value of the inventory in the ftht of sales now that the inventory has been sold.

The fair value difference is deducted from the cost of sales. The adjustment is required to ensure that the cost of sales reflects the fair value of the inventory when the subsidiary was acquired.