Question - Cromartie Corporation purchases a two-year insurance policy on July 1, 2008. At the time, they recorded the transaction as a debit to Insurance Expense and a credit to Cash for $6,000. What adjusting entry should they make on December 31, 2008?
A. Debit Insurance Expense (Ret. Earn) and credit Prepaid Insurance for $1,500
B. Debit Prepaid Insurance and credit Insurance Expense (Ret. Earn) for $4,500
C. Debit Prepaid Insurance and credit Cash for $4,500
D. No adjustment is necessary