(Expected Cash Flows and Present Value) Dannys Lawn Equipment sells high-quality lawn mowers and offers a 3-year warranty on all new lawn mowers sold. In 2025, Danny sold $300,000 of new specialty mowers for golf greens for which Dannys service department does not have the equipment to do the service. Danny has entered into an agreement with Mower Mavens to provide all warranty service on the special mowers sold in 2025. Danny wishes to measure the fair value of the agreement to determine the warranty liability for sales made in 2025. The controller for Dannys Lawn Equipment estimates the following expected warranty cash outflows associated with the mowers sold in 2025.

\begin{tabular}{lccc} 2y Year & Cash Flow Estimate & & Probability Assessment \\ & $2,500 & & 20% \\ & 4,000 & & 0 \\ & 5,000 & & 20 \\ \hline 2027 & $3,000 & 30% \\ & 5,000 & 50 \\ & 6,000 & 20 \\ \hline 2028 & $4,000 & 30% \\ & 6,000 & & 40 \\ & 7,000 & 30 \end{tabular}