Current Attempt in Progress Leon's Lawn Equipment sells high-quality lawn mowers and offers a 3-year warranty on all new lawn mowers sold. In 2025, Leon sold $294,900 of new specialty mowers for golf greens for which Leon's service department does not have the equipment to do the service. Leon has entered into an agreement with Mower Mavens to provide all warranty service on the special mowers sold in 2025. Leon wishes to measure the fair value of the agreement to determine the warranty liability for sales made in 2025. The controller for Leon's Lawn Equipment estimates the following expected warranty cash outflows associated with the mowers sold in 2025. Cash Flow Year Estimate 2026 $2,430 4,240 4,710 2027 2028 $2.950 5,040 5,710 $3,990 6,380 7,090 Probability Assessment 20% 60% 20% 30% 50% 20% 30% 40% 30% Click here to view factor tables Using expected cash flow and present value techniques, determine the value of the warranty liability for the 2025 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 0 decimal places, e.g. 458,581.) The value of the warranty liability for the 2025 sales $
Current Attempt in Progress Leon's Lawn Equipment sells high-quality lawn mowers and offers a 3-year warranty on all new lawn mowers sold. In 2025, Leon sold $294,900 of new specialty mowers for golf greens for which Leon's service department does not have the equipment to do the service. Leon has entered into an agreement with Mower Mavens to provide all warranty service on the special mowers sold in 2025. Leon wishes to measure the fair value of the agreement to determine the warranty liability for sales made in 2025. The controller for Leon's Lawn Equipment estimates the following expected warranty cash outflows associated with the mowers sold in 2025. Cash Flow Year Estimate 2026 $2,430 4,240 4,710 2027 2028 $2.950 5,040 5,710 $3,990 6,380 7,090 Probability Assessment 20% 60% 20% 30% 50% 20% 30% 40% 30% Click here to view factor tables Using expected cash flow and present value techniques, determine the value of the warranty liability for the 2025 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 0 decimal places, e.g. 458,581.) The value of the warranty liability for the 2025 sales $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Current Attempt in Progress
Leon's Lawn Equipment sells high-quality lawn mowers and offers a 3-year warranty on all new lawn mowers sold. In
2025, Leon sold $294,900 of new specialty mowers for golf greens for which Leon's service department does not have
the equipment to do the service. Leon has entered into an agreement with Mower Mavens to provide all warranty
service on the special mowers sold in 2025. Leon wishes to measure the fair value of the agreement to determine the
warranty liability for sales made in 2025. The controller for Leon's Lawn Equipment estimates the following expected
warranty cash outflows associated with the mowers sold in 2025.
Cash
Flow
Year Estimate
2026
$2,430
4,240
4,710
2027 $2,950
5,040
5,710
2028
$3,990
6,380
7,090
Probability
Assessment
20%
60%
20%
30%
50%
20%
30%
40%
30%
Click here to view factor tables
Using expected cash flow and present value techniques, determine the value of the warranty liability for the 2025 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 0 decimal places, e.g. 458,581.)
The value of the warranty liability for the 2025 sales $
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