Mountaineer Excavation operates in a low-lying area that is subject to heavy rains and flooding. Because of this, Mountaineer purchases one year of flood insurance in advance on March 1, paying $30,000 ($2,500/month).
(1) Record the purchase of insurance in advance on March 1.
(2) Record the adjusting entry on December 31.
(3) Calculate the year-end adjusted balances of Prepaid Insurance and Insurance Expense (assuming the balance of Prepaid Insurance at the beginning of the year is $0)?