On January 1, a company purchased a five-year insurance policy for $2,500 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is: Multiple Choice Debit Insurance Expense, $500; credit Prepaid Insurance, $500. Debit Prepaid Insurance, $500; credit Insurance Expense, $500. Debit Prepaid Insurance, $2,000; credit Insurance Expense, $2,000. Debit Insurance Expense, $500; credit Prepaid Insurance, $2,000. Debit Prepaid Insurance, $2,500; credit Cash, $2,500.
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