On December 31, Carmack Company's Prepaid Insurance Account Had a Balance

Multiple Choice

On December 31, Carmack Company's Prepaid Insurance account had a balance before adjustment of $6,000. The insurance was purchased on July 1 of the same year for one year of insurance coverage, with coverage beginning on that date. The adjusting entry needed on December 31 is:

A) Debit Prepaid Insurance $6,000; credit Cash $6,000.
B) Debit Insurance Expense $3,000; credit Prepaid Insurance $3,000.
C) Debit Insurance Expense $3,000; credit Accounts Payable $3,000.
D) Debit Insurance Expense $6,000; credit Accounts Payable $6,000.
E) Debit Cash $6,000; credit Prepaid Insurance $6,000.