Harrod Company paid $4,800 for a 4-month insurance premium in advance on November 1, with coverage beginning on that date. The balance in the prepaid insurance account before adjustment at the end of the year is $4,800 and no adjustments had been made previously. The adjusting entry required on December 31 is:
Debit Prepaid Insurance, $2,400; credit Insurance Expense, $2,400.
Debit Cash, $4,800; Credit Prepaid Insurance, $4,800.
Debit Insurance Expense, $1,200; credit Prepaid Insurance, $1,200.
Debit Prepaid Insurance, $1,200; credit Insurance Expense, $1,200.
Debit Insurance Expense, $2,400; credit Prepaid Insurance, $2,400.
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