The Prepaid Insurance Account of Stephen's Spas Shows a Balance

Multiple Choice

The Prepaid Insurance account of Stephen's Spas shows a balance of $3000, representing a two-year insurance premium paid on 1 February 2018. After recording the adjustment on 30 June 2018, the end of the accounting period:

A) Insurance expense in the income statement is $3000 and Prepaid Insurance in the balance sheet is $0.
B) Insurance expense in the income statement is $625 and Prepaid Insurance in the balance sheet is $2375.
C) Insurance expense in the income statement is $2375 and Prepaid Insurance in the balance sheet is $625.
D) Insurance expense in the income statement is $750 and Prepaid Insurance in the balance sheet is $2250.