On June 30, 2009, Sampras Company reported the following account balances:

Receivables Inventory Buildings (net) Equipment (net) Total assets

$ 80,000 Current liabilities $ (10,000)

70,000 Long-term liabilities (50,000)

75,000 Common stock (90,000)

25,000 Retained earnings (100,000)

$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 records.

• 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.