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Alan's Lawn Equipment sells high-quality lawn mowers and offers a3-year warranty on all new lawn mowers sold. In 2020, Alan sold $297,800 of new specialty
Alan's Lawn Equipment sells high-quality lawn mowers and offers a3-year warranty on all new lawn mowers sold. In 2020, Alan sold $297,800 of new specialty mowers for golf greens for which Alan's service department does not have the equipment to do the service. Alan has entered into an agreement with Mower Mavens to provide all warranty service on the special mowers sold in 2020. Alan wishes to measure the fair value of the agreement to determine the warranty liability for sales made in 2020. The controller for Alan's Lawn Equipment estimates the following expected warranty cash outflows associated with the mowers sold in 2020. Cash Flow Probability Year Estimate Assessment 2021 $2,280 20% 4,020 60% 5.110 20% 2022 $2,760 30% 4,780 50% 6,000 20% 2023 $3,900 30% 5,960 40% 6,500 30% Using expected cash flow and present value techniques, determine the value of the warranty liability for the 2020 sales. Use an annual discount rate of 5%. Assume all cash flows occur at the end of the year. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.) The value of the warranty liability for the 2020 sales $
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