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    Entry for combination

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    17.) On June 30, 2009, Sampras Company reported the following account balances:
    Receivables $ 80,000 Current liabilities $ (10,000)
    Inventory 70,000 Long-term liabilities (50,000).
    Buildings (net) 75,000 Common stock (90,000)'
    Equipment (net) 25,000 Retained earnings (100,000)
    Total assets $250,000 Total liabilities and equities $(250,000)
    On June 30, 2009, Pelham paid $300,000 cash for all assets and liabilities of Sampras, which will cease to exist as a separate entity. In connection with the acquisition, Pelham paid $10,000 in direct combination costs and agreed to pay $50,000 to the former owners of Sampras contingent on meet¬ing certain revenue goals during 2010. Pelham estimated the present value of its probability adjusted expected payment for the contingency at $15,000.
    In determining its offer, Pelham noted the following pertaining to Sampras:
    ? It holds a building with a fair value $40,000 more than its book value.
    ? It has developed a customer list appraised at $22,000, although it is not recorded in its financial
    ? It has research and development activity in process with an appraised fair value of $30,000.
    However, the project has not yet reached technological feasibility and the assets used in the
    activity have no alternative future use.
    ? Book values for the receivables, inventory, equipment, and liabilities approximate fair values.
    Prepare Pelham's accounting entry to record the combination with Sampras using the
    a. Acquisition method.
    b. Purchase method.

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    Solution Summary

    The solution explains the entry for combination using purchase method and acquisition method