On October 1, 2019, Adams Company paid $3,480 for a two-year insurance policy with the insurance coverage beginning on that date. As of December 31, 2019, which of the following account balances are correct after adjusting entries have been made?

Multiple Choice

• Prepaid insurance $3,480, and Insurance expense $0.

• Prepaid insurance $3,045, and Insurance expense $435.

• Prepaid insurance $0, and Insurance expense $3,480.

• Prepaid insurance $1,740, and Insurance expense $1,740.