The Prepaid Insurance account, before the 2007 adjusting journal entries, showed a balance of $2,000. An analysis of the insurance policies showed that $400 of unexpired benefits remain on the policies at December 31. The adjusting journal entry to reflect this information would be:

Debit Insurance Expense for the difference between the begininng balance and the ending balance
Credit Prepaid Insurance for the amount of insurance used in the period.