A company pays \$18,000 for a 12-month insurance policy on July 1st. What adjusting entry should be made on December 31st?

• A. Debit Prepaid Insurance \$9,000, Credit Insurance Expense \$9,000
• B. Debit Prepaid Insurance \$18,000, Credit Insurance Expense \$18,000
• C. Debit Insurance Expense \$18,000, Credit Prepaid Insurance \$18,000
• D. Debit Insurance Expense \$9,000, Credit Prepaid Insurance \$9,000

Answer: (D)