On September 1, 2015, Richard started a small business called "Ricky Rock Wrestling for Fun". "Ricky Rock" offers a party package designed for active kids, teen and adults that want to learn and practice wrestling activities for fun by learning how to perform headlocks, leg scissors and other tricks.

The following transaction occurred during the first month of operations, please indicate how it should be recorded as a journal entry:

September 1, Verbally agreed to sign a 12 month commercial insurance contract for any liability that might emerge from the activity. Amount $600 per month for 1 year.

The economic event does not need a journal entry

Dr. Insurance Expense 600 and Cr. Insurance Payable 600

None of the others journal entries are correct, it is another journal entry

Dr. Prepaid Insurance 7,200 and Cr. Cash 7,200

Dr. Prepaid Insurance 7,200 and Cr. Insurance Payable 7,200