Sugar City uses the purchases method to record all prepayments. The City has a 6/30 fiscal year-end. On 12/31/06, the City purchased a three-year insurance policy covering all city owned vehicles accounted acquired by the General Fund to be used in general government activity. Cost of the policy was $360,000. After the 6/30/07 closing entries, the appropriate balance sheet accounts and balances associated with this transaction are in the City s General Fund

		Prepaid Insurance $300,000; Expenditure $60,000.
		Prepaid Insurance $300,000; Expenditures $360,000
		Prepaid Insurance $0; Expenditure $360,000.
		Prepaid Insurance $0; Expenditures $60,000.