On March 31, 20X8, your calendar year company takes out a 3-year insurance policy with a premium of $5,000 a year and pays the entire $15,000 in...

On March 31, 20X8, your calendar year company takes out a 3-year insurance policy with a premium of $5,000 a year and pays the entire $15,000 in advance, booking it as prepaid insurance. On December 31, 20X8, you discover that the adjusting entry debited Insurance Expense and credited Prepaid Insurance for $5,000. Your correcting journal entry will:

debit Insurance Expense for $3,750

credit Insurance Expense for $3,750

credit Insurance Expense for $1,250

debit Prepaid Insurance for $5,000