Answer:
Insurance expense will increase $2,250
Explanation:
the adjusting entry will recognize the expired insurance thus, it will increase the expense and decrease the prepaid.
a complete year is worth 3,000 so each month : 3,000 / 12 = 250
From April 1st to December 31th 9 montths has expired:
250 x 9 = 2,250 expired insurance.
the entry will be as follows:
insurance expense 2,250 debit (+expense)
prepaid insurance 2,250 credit (-assets)
Therefore the first option is correct.
