Exercise 18-7 Blossom Biotech enters into a licensing agreement with Pang Pharmaceutical for a drug under development. Blossom will receive a payment of $12,500,000 if the drug receives regulatory approval. Based on prior experience in the drug-approval process, Blossom determines it is 70% likely that the drug will gain approval and a 30% chance of denial.

Determine the transaction price of the arrangement for Blossom Biotech.

Transaction price $

Assuming that regulatory approval was granted on December 20, 2017, and that Blossom received the payment from Pang on January 15, 2018, prepare the journal entries for Blossom. The license meets the criteria for point-in-time revenue recognition.

Date Account Titles and . Explanation Debit Credit