On January 1 2017 Piper Company entered into an

agreement #2568
On January 1, 2017, Piper Company entered into an agreement with Save Mart to sell its most
popular product, the gadget. The contract stipulates that the price per unit will decrease as Save
Mart purchases higher volumes of the gadget, as follows:The contract states that Save Mart
pays Piper the unit price based on the current sales volume. Once a volume threshold is
reached, the price is retroactively reduced to the applicable price per unit. Based on its past
experience with similar contracts, Piper believes that the total sales volume for the year will be
1,800 units and uses the most likely amount approach to estimate variable consideration. In
addition, Piper concludes it is probable that a significant reversal in the amount of cumulative
revenue recognized will not occur once the uncertainty surrounding the variable consideration is
resolvedRequired: 1. Determine the transaction price per unit that Piper should use to record
revenue. 2. Assume that Save Mart purchases 800 units in the first quarter of 2017 and 900
units in the second quarter of 2017. Prepare Piper’s journal entries to record the sales in the
first and second quarters. 3. Given the higher than expected sales volume in the first half of the
year, Piper increases its estimate of the sales volume to 2,800 units. Prepare the journal entry
to record this change in estimate.View Solution:
On January 1 2017 Piper Company entered into an agreement

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