On July 1, 2012, Ryan Company paid the premium in advance on a one-year insurance policy on equipment in the amount of $6,000. At that time, the full amount paid was recorded as prepaid insurance. On December 31, 2012, the end of the accounting year, Ryan Company would be required to record an adjusting entry that would include a

$2,500 decrease to prepaid insurance.

$3,000 increase to insurance expense.

$3,000 increase to prepaid insurance.

$2,500 increase to insurance expense.