Exercise 18-7 (Part Level Submission)

Pina Biotech enters into a licensing agreement with Pang Pharmaceutical for a drug under development. Pina will receive a payment of $12,600,000 if the drug receives regulatory approval. Based on prior experience in the drug-approval process, Pina determines it is 75% likely that the drug will gain approval and a 25% chance of denial.

a) Determine the transaction price of the arrangement for Pina Biotech.

Transaction price $

b) The parts of this question must be completed in order. This part will be available when you complete the part above.