Gibson Company Paid $12,000 on June 1, 2014 for a Two-Year

Multiple Choice

Gibson Company paid $12,000 on June 1, 2014 for a two-year insurance policy and recorded the entire amount as Insurance Expense. The December 31, 2014 adjusting entry is

A) debit Insurance Expense and credit Prepaid Insurance, $3,500.
B) debit Insurance Expense and credit Prepaid Insurance, $8,500.
C) debit Prepaid Insurance and credit Insurance Expense, $3,500
D) debit Prepaid Insurance and credit Insurance Expense, $8,500.