The Prepaid Insurance account has a normal balance of $5,625 at the beginning of the month. The company used $1,470 of insurance coverage during the month. Which of the following statements is correct?

• The company should credit Insurance Expense for $1,470 and debit Prepaid Insurance for $1,470.

• Retained earnings will decrease and stockholders' equity will increase.

• The company should debit Insurance Expense for $1,470 and credit Prepaid Insurance for $1,470.

• Retained earnings and stockholders' equity will both increase.