Mal de Mere Cruises purchased a five-year insurance policy for its ships on April 1, 2016 for $50,000. Assuming that April 1 is the effective date of the policy, the adjusting entry on December 31, 2016 is

a. Prepaid Insurance................................................................. 7,500

Insurance Expense........................................................ 7,500

b. Insurance Expense................................................................ 7,500

Prepaid Insurance.......................................................... 7,500

c. Insurance Expense................................................................ 10,000

Prepaid Insurance.......................................................... 10,000

d. Insurance Expense................................................................ 2,500

Prepaid Insurance.......................................................... 2,500