Final answer:
The insurance expense for Hawes Company for the year ended December 31, 2022, is calculated based on eight months of coverage, resulting in an expense of $6,600.
Step-by-step explanation:
To calculate the amount of insurance expense for Hawes Company for the year ended December 31, 2022, we must allocate the cost of the three-year insurance policy, totaling $29,700, over its coverage period. Since coverage began immediately on April 30, 2022, and extends for three years, we need to determine the expense incurred from April 30, 2022, through December 31, 2022. The total expense for a full year would be $29,700 divided by 3 years, resulting in $9,900 per year. However, since we are only interested in the part of the year 2022 after the policy began, we calculate the expense for eight months (May through December).
Here's the calculation:
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- Annual insurance cost: $29,700 / 3 years = $9,900
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- Monthly insurance cost: $9,900 / 12 months = $825
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- Insurance expense for eight months in 2022: $825 * 8 months = $6,600
Therefore, the insurance expense relating to the policy that will be reported by Hawes Company for the year ended December 31, 2022, is $6,600.