Cruella Inc. owns 85% of Horace Co. During 20X9, Cruella sells goods to Horace with a 25% gross profit. Horace sold all of these goods to a 3rd party in 20X9. For the ZOX9 consolidated financial statements, how should the summation of the Cruella and Horace income statement items be adjusted? C1. No adjustment is needed. 2. Sales and COGS should be reduced by 80% of the intercompany sales amount. 3. Net income should be reduced by 80% of the gross profit on intercompany sales amount. 4. All intercompany sales and costs of goods sold must be eliminated in consolidation