On April 1, Smart, Inc. paid $7,200 for an insurance premium on a three-year insurance policy. How does this transaction affect Smart's accounts?

a. Increase prepaid insurance and decrease cash by $7,200 each

b. Increase prepaid insurance and decrease retained earnings by $7,200 each

c. Increase insurance expense and decrease cash by $7,200 each

d. Increase unearned insurance and decrease cash by $7,200 each