Buffalo Tom Cruises purchased a five-year insurance policy for its ships on April 1, 2012 for $50,000. Assuming that April 1 is the effective date of the policy, the adjusting entry on December 31, 2012 is Insurance Expense 2,500 Prepaid Insurance 2,500 Prepaid Insurance 7,500 Insurance Expense 7,500 Insurance Expense 10,000 Prepaid Insurance 10,000 Insurance Expense 7,500 Prepaid Insurance 7,500