(Solution) - Embree Corp purchased a four year insurance policy on May -(2025 Original AI-Free Solution)

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Academic Level: Undergrad. (yrs 3-4)

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Embree Corp. purchased a four- year insurance policy on May 1, Year 2, for $ 12,000, effective immediately. The company expensed the full cost of the policy in Year 2. The correct journal entry for Year 2 (ending December 31) will include a:
a. Debit to prepaid insurance of $ 10,000.
b. Credit to prepaid insurance of $ 9,000.
c. Debit to insurance expense of $ 3,000.
d. Credit to insurance expense of $ 2,000.