Exercise 6-07

Blair Biotech enters into a licensing agreement with Pang Pharmaceutical for a drug under development. Blair will receive a payment of $10,000 if the drug receives regulatory approval. Based on prior experience with the drug-approval process, Blair determines it is 90% likely that the drug will gain approval, with a 10% chance of denial.

Determine the transaction price of the arrangement for Blair Biotech.

Transaction price $10 000

So how do we find

Assuming that regulatory approval was granted on December 20, 2020, and that Blair received the payment from Pang on January 15, 2021, prepare the journal entries for Blair. (Credit account titles are automatically indented when the amount is entered.Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)