A company purchases one year of flood insurance in advance on May 1, paying $24,000 ($2,000/month). Record the adjusting entry on December 31.
a) Debit Prepaid Insurance $16,000, Credit Insurance Expense $8,000
b) Debit Prepaid Insurance $24,000, Credit Insurance Expense $24,000
c) Debit Insurance Expense $24,000, Credit Prepaid Insurance $24,000
d) Debit Insurance Expense $8,000, Credit Prepaid Insurance $16,000