Increase in prepaid insurance expense an asset decreasing, Accounting Basics

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Increase in prepaid insurance expense an asset decreasing

On December 31, 2012, Lanigan Company prepaid the premium of $6,000 cash for insurance coverage during January 2013. Which of the following would be the correct entry to record this transaction?
Question 3 options:

Increase in prepaid insurance expense, an asset, of $6,000 and decrease in cash of $6,000.
Decrease in insurance payable of $6,000, with no effect on net income or retained earnings, and an increase in cash of $6,000.
Increase in insurance expense, decreasing both net income and retained earnings by $6,000 and decrease in cash of $6,000.
Increase in prepaid insurance expense, an asset, decreasing both net income and retained earnings by $6,000 and decrease in cash of $6,000.

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Accounting Basics: Increase in prepaid insurance expense an asset decreasing

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