An entity's financial year ends on 30 June. On 1 May it pays a 12-month insurance premium of $24 000. Under the accrual system of accounting how much of the premium will be recognised as an expense for the current year ended 30 June and how much will be treated as an asset (prepaid insurance)?

$4 000 expense and $20 000 prepaid insurance.

$20 000 expense and $4 000 prepaid insurance.

$12 000 expense and $12 000 prepaid insurance.

$6 000 expense and $18 000 prepaid insurance.