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 0 decimal places, e.g. 458,581.)

Adamss Lawn Equipment sells high-quality lawn mowers and offers a 3-year warranty on all new lawn mowers sold. In 2020, Adams sold $282,900 of new specialty mowers for golf greens for which Adamss service department does not have the equipment to do the service. Adams has entered into an agreement with Mower Mavens to provide all warranty service on the special mowers sold in 2020. Adams wishes to measure the fair value of the agreement to determine the warranty liability for sales made in 2020. The controller for Adamss Lawn Equipment estimates the following expected warranty cash outflows associated with the mowers sold in 2020.

Year

Cash Flow

Estimate

Probability

Assessment

2021 $2,440 20%

3,930 60%

5,460 20%

2022 $2,900 30%

5,440 50%

5,560 20%

2023 $3,980 30%

5,860 40%

6,510 30%

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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 4%. 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.)