If the beginning prepaid insurance balance is $3,400, and the ending value of the insurance is $1,200, the correct adjustment on the work sheet is to debit:

Debit Insurance expense $2,200

Explanation:

Given an opening prepaid insurance balance of $3,400 and a closing balance of $1,200, a deduction of (3,400 - 1,200 = ) $2,200 had occurred during the period.

Seeing that prepaid insurance expenses represents a payment for insurance for a future period, the debit from the account is likely the expense for the given period.

Therefore, the likely account entry during the year is as shown below.

Debit Insurance Expense Account $2,200

Credit Insurance Prepaid Account $2,200.