On April 1, 2014, the premium on a one-year insurance policy was purchased for $6,600 cash with the insurance coverage beginning on that date. The books are adjusted only at year-end. Which of the following correctly describes the effect on the financial statements of the December 31, 2014 adjusting entry?

Insurance expense will increase $4,950.

Prepaid insurance will increase $4,950.

Insurance expense will increase $1,650.

Prepaid insurance will decrease $1,650.