On December 31 of Year 1 the Prepaid Insurance account showed a debit balance of $900, which was for coverage for the three months, January through March of Year 2. On April 1 of Year 2 the company purchased another policy covering a two-year period starting from that date. The two-year premium of $9,600 was paid and debited to Prepaid Insurance.

a. Prepare the adjusting entry required on December 31 of Year 2 to account for insurance expense for the entire year. No other adjusting entry was made during this year.

b. What is the balance in the Prepaid Insurance account on December 31 of Year 2?