Either way would work. If you factory reset, then it is unregistered from any account and the content is removed.
If you remove it from your sister's account, either from her web page on Amazon or from the device, your sister's account is gone and all her registered apps & books & etc.
After doing either, re-register to your mom's account on Amazon.
Once off your sister's account, none of her DRM stuff will work on that device, even if side loaded from your PC, since that's what DRM is for, to restrict the stuff to one person.
Non-DRM books (if any) will continue to work.
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