Wilson Company paid $5800 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 $5800, and no adjustments had been made previously. The adjusting entry required on December 31 is:
A. Debit Prepaid Insurance, $1450; credit Insurance Expense, $1450.
B. Debit Insurance Expense, $2900; credit Prepaid Insurance, $2900.
C. Debit Cash, $5800; Credit Prepaid Insurance, $5800.
D. Debit Prepaid Insurance, $2900; credit Insurance Expense, $2900.
E. Debit Insurance Expense, $1450; credit Prepaid Insurance, $1450.
Answer: B
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