Practice Questions, Question 10 On July 1, East Lake, Inc. purchased a 2-year insurance policy for $12,600. Prepaid Insurance was debited for the entire amount. On December 31, when the annual financial statements are prepared, the appropriate adjusting journal entry to be made would be to O debit Prepaid Insurance $2,100; credit Insurance Expense $2,100. debit Insurance Expense $9,450; Credit Prepaid Insurance $9,450. O debit Prepaid Insurance $12,600; credit Insurance Expense $12,600 O debit Insurance Expense $3,150; credit Prepaid Insurance $3,150