On July 1, 2021, Fat Corp. paid for an insurance policy of $5,100 covering 12 months, effective the same day. Prepaid insurance was debited for the full amount. What is the adjusting entry needed for insurance on December 31, 2021 if the company prepares financial statements annually?
a) Debit Insurance Expense $2,550 and credit Prepaid Insurance $2,550
b) Debit Prepaid Insurance $5,100 and credit Cash $5,100
c) Debit Insurance Expense $5,100 and credit Prepaid Insurance $5,100
d) Debit Accrued Insurance Expense $2,550 and credit Cash $2,550
e) Debit Prepaid Insurance $2,550 and credit Insurance Expense $2,550