Question

Fix the sentence by following the apostrophe rule.

Answer 1

The correct answer is: It's a shame that the books' covers were all torn and tattered.

By following the apostrophe rule the word "it's" will break down into "it is" which will be appropriate in the sentence. Since "books" should be in plural form, you just have to add an apostrophe in the end. 

Answer 2

The correct answer is: It's a shame that the books' covers were all torn and tattered.

An apostrophe is used  after the "s" at the end of a plural noun to show possession.

Apostrophes have two basic functions; on the one hand, they show possession. On the other hand,  indicate letters have been removed to form a contraction.

In this case, the function of the apostrophe is the first one explained. You use an apostrophe + S ('s) to show that one person/thing owns or is a member of something.