Schwarber Corporation neglected to record ANY journal entries relating to the purchase of one-year property insurance policy effective October 1, 2014 for $72,000. Schwarber paid the full amount of the annual premium at the inception of the policy.

How would you Correct the journal entry/entries:

a.

Debit: Prepaid insurance (+A) $72,000

Credit: Cash (-A) $72,000

b.

Debit: Insurance expense (+E, -SE) $18,000

Credit: Prepaid insurance (-A) $18,000

c.

Debit: Prepaid insurance (+A) $72,000

Credit: Cash (-A) $72,000

Debit: Insurance expense (+E, -SE) $18,000

Credit: Prepaid insurance (-A) $18,000

d. No correcting entry is required.

*** Please explain the answer, and why other options are incorrect