On January 1, a company purchased a five-year insurance policy for $3,700 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:
a. debit Insurance Expense, $740; credit Prepaid Insurance $740
b. debit Prepaid Insurance, $3,700; credit Cash, $3,700
c. debit Prepaid Insurance, $2,960; credit Insurance Expense, $2,960
d. debit Insurance Expense, $740; credit Prepaid Insurance $2,960
e. debit Prepaid Insurance, $740; credit Insurance Expense, $740
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