ABC Ltd. has a 30 June fiscal year end. ABC Ltd. purchased a one-year insurance policy of $12,000 on its office equipment on 1 February 2016. Which of the following adjusting entry would be made by ABC Ltd. on 30 June 2016:

Select one:

a. Dr Prepaid Insurance $12,000

Cr Insurance Expense $7,000

Cr Cash $5,000

b. Dr Prepaid Insurance $5,000

Cr Insurance Expense $5,000

c. Dr Insurance Expense $5,000

Cr Prepaid Insurance $5,000

d. Dr Insurance Expense $5,000

Dr Insurance Payable $7,000

Cr Prepaid Insurance $12,000