The correct amount of prepaid insurance shown on a company’s December 31, 2011, balance sheet was $600. On July 1, 2012, the company paid an additional insurance premium of $1,440, recorded as more prepaid insurance. On the December 31, 2012, balance sheet, the amount of prepaid insurance was correctly shown as $720. What amount of insurance expense would appear on the company’s income statement for the year ended December 31, 2012? Is the adjustment to record the insurance expense related to an accrual or a deferral?
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