Williams Company paid $24,000 for a two-year insurance policy on October 1 and recorded the $24,000 as a debit to Prepaid Insurance and a credit to Cash. What adjusting entry should Williams make on December 31, the end of the accounting period (no previous adjustment has been made)?

Select one:

A.

Prepaid Insurance

3,000

Insurance Expense

3,000

B.

Insurance Expense

12,000

Prepaid Insurance

12,000

C.

Prepaid Insurance

21,000

Insurance Expense

21,000

D.

Insurance Expense

3,000

Prepaid Insurance

3,000

E. None of the above