Cowboy Company purchased a two-year hazard insurance policy on July 1 and recorded the $3,600premium to prepaid

insurance. At its December 31 year-end, Cowboy Company would record which of the following adjusting entries?

a)

Prepaid Insurance 900

Insurance Expense 900

b)

Insurance Expense 900

Prepaid Insurance 2,700

Insurance Payable 3,600

c)

Insurance Expense 900

Prepaid Insurance 900

d)

Insurance Expense 3,600

Prepaid Insurance 3,600

(Could you explain how you find the answer?)