Bust-A-Knee Inc. (Bust-A-Knee) is a medical device company that specializes in developing knee replacement hardware. In 2020, Bust-A-Knee acquired 100 percent equity ownership of MD International (MD) for a purchase price of $15 million. MD is a pharmaceutical company that is developing two drugs: (1) a drug to cure cancer, Drug X, and (2) a pain medication, OuchX. Bust-A-Knee acquired the entity to expand into a new sector within the medical field. Bust-A-Knee concluded the acquisition of MD was a business combination. In purchase accounting, Bust-A-Knee recognized intangible assets for the in-process research and development (IPR&D) related to the ongoing development of Drug X and OuchX, among other acquired intangible assets. The IPR&D of Drug X and OuchX had acquisition-date fair values of $4 million and $3 million, respectively. During 2021, Bust-A-Knee determined its operations could not support the continued development of Drug X because significant efforts were being put forth in the development of OuchX. Since the date of acquisition, Bust-A-Knee had not invested any additional funding in the development of Drug X. Bust-A-Knee determined that there was no change in the carrying amount recorded on the date of acquisition. Rather than abandon the development project, Bust-A-Knee entered into an agreement with Pharmers Company (Pharmers) to transfer its ownership interests in (and control of) the IPR&D for Drug X. Pharmers, the markets largest pharmaceutical company, will use Drug Xs IPR&D to continue its development, and obtain FDA approval to sell the drug on the open market. Selling IPR&D is not part of Bust-A-Knees ordinary activities and therefore Pharmers is not a customer of Bust-A-Knee (as defined by ASC 606). In return, Pharmers will pay Bust-A-Knee (1) a nonrefundable fixed fee of $2 million at contract execution; (2) a contingent future payment of $500,000, when Drug X is FDA approved; and (3) a 10 percent royalty fee based on the annual sales earned by Pharmers for the sale of Drug X in each of the subsequent five years following FDA approval. On the date of transfer, Bust-A-Knee estimates that the total consideration (nonrefundable fixed fee and contingent future fees) will be between $5 million and $6.5 million and that the weighted average expected amount of consideration Bust-A-Knee expects to be entitled to (at an 80 percent probability) is $5.5 million. Under the agreement, Pharmers paid $2 million when it obtained control of the IPR&D of Drug X and will pay the additional amounts if and when the associated contingencies related to such amounts are resolved.

Required: On the date of transfer to Pharmers, how should Bust-A-Knee record the transaction?