On 1 January 2012, Cowboys Ltd acquired all the issued shares in Tate Ltd. At that date, the inventory of Tate Ltd had a fair value of $10 000 more than its carrying amount. By 30 June 2013, 75% of the inventory was sold to an entity outside of the group. The business combination valuation consolidation adjustment for inventories as at 30 June 2013 will include:

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When the business combination occurred, the fair value adjustment for inventory of $10 000 was recorded as a consolidation adjustment to the inventory balance. As 75% of the inventory was sold to an entity outside the group, this means that 25% of the inventory remains in the group's inventory balance. Therefore, the consolidation adjustment should be recalculated based on the remaining 25% of the inventory. This results in a debit to inventories of $2 500 (25% of $10 000) and a debit to cost of sales of $7 500 (75% of $10 000). This is because the fair value adjustment for inventory has to be recognized as a reduction to the cost of goods sold when the inventory is sold.

On 1 January 2012, Cowboys Ltd Acquired All the Issued