Hoffman, Incorporated adjusts its books each month but closes its books at the end of the year. The companys unadjusted trial balance at March 31 is as follows:

	Debit	Credit
Cash	$ 10,920
Accounts Receivable	9,620
Supplies	1,300
Prepaid Insurance	3,120
Equipment	26,000
Accumulated Depreciation: Equipment		$ 10,400
Unearned Service Revenue		6,500
Capital Stock		5,200
Retained Earnings		23,400
Dividends	1,560
Service Revenue Earned		16,510
Salaries Expense	7,800
Utilities Expense	390
Rent Expense	1,300
Totals	$ 62,010	$ 62,010

On March 1, Hoffman paid in advance for four months' insurance. The necessary adjusting entry at March 31 includes which of the following?

Multiple Choice

• A credit to Prepaid Insurance for $2,340.

• A debit to Prepaid Insurance for $2,340.

• A credit to Prepaid Insurance for $780.

• A debit to Prepaid Insurance for $780.