Answer:
The correct answer is Option B.
Explanation:
Under straight-line method, depreciation expense is (cost - residual value) / No of years = ($36,000,000 - $0) / 5 years = $7,200,000 yearly depreciation expense.
Accumulated depreciation expense by straight-line in 2021 will be (3 years): $7,200,000 x 3 years = $21,600,000.
The correcting journal entries will be:
Debit Fixed asset cost $36,000,000
Credit Operating expense $36,000,000
<em>(Reversal of wrong posting)</em>
Debit Depreciation expense $21,600,000
Credit Accumulated depreciation $21,600,000
<em>(Being depreciation charge for 3 years)</em>
