Smokey Company Purchases a One-Year Insurance Policy on July 1

Multiple Choice

Smokey Company purchases a one-year insurance policy on July 1 for $3,600. The adjusting entry on December 31 is

A) debit Insurance Expense, $1,800; credit Prepaid Insurance, $1,800
B) debit Insurance Expense, $1,500; credit Prepaid Insurance, $1,500
C) debit Insurance Expense, $2,100; credit Prepaid Insurance, $2,100
D) debit Prepaid Insurance, $1,800; credit Cash, $1,800