On April 1, 2014, the premium on a one-year insurance policy waspurchased for $3,900 cash with the i

On April 1, 2014, the premium on a one-year insurance policy waspurchased for $3,900 cash with the insurance coverage beginning onthat date. The books are adjusted only at year-end. Which of thefollowing correctly describes the effect on the financialstatements of the December 31, 2014 adjusting entry? (a) Insurance expense will increase $975. (b) Insurance expense will increase $2,925. (c) Prepaid insurance will decrease $975. (d) Prepaid insurance will increase $2,925. . . .