When inventory that has been subject to a fair value adjustment is sold, the effect on the business combination valuation adjustment in the year of sale includes a debit to cost of sales.

Question

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When inventory subject to fair value adjustment is sold, it is recorded at its fair value less cost to sell, resulting in a gain or loss. This gain or loss impacts the business combination valuation adjustment, which is adjusted by debiting cost of goods sold.

When Inventory That Has Been Subject to a Fair Value