ohn's Lawn Equipment sells high-quality lawn mowers and offers a 3-year warranty on all new...
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ohn's Lawn Equipment sells high-quality lawn mowers and offers a 3-year warranty on all new lawn mowers sold. In 2017, John sold $281,900 of new specialty mowers for golf greens for which John's service department does not have the equipment to do the service. John has entered into an agreement with Mower Mavens to provide all warranty service on the special mowers sold in 2017 John wishes to measure the fair value of the agreement to determine the warranty liability for sales made in 2017. The controller for John's Lawn Equipment estimates the following expected warranty cash outflows associated with the mowers sold in 2017 Cash Flow Probability Year Estimate $2,490 4,160 5,220 Assessment 20% 60% 20% 2018 $3,250 5,330 6,270 30% 50% 20% 2019 $3,830 6,110 7,180 2020 30% 40% 30%
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