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.