Question
The accounting cycle for Paris Project Limited is from January 1 to December 31, At the start of July, the company signed an agreement
The accounting cycle for Paris Project Limited is from January 1 to December 31, At the start of July, the company signed an agreement to purchase a new warehouse for $30,000,000. The company paid 50% in cash and the remainder by taking out a 5-year loan. Annual interest expense on the loan is $3,000,000. Interest will be paid in cash on June 30 each year of the loan period. Annual depreciation on the new warehouse is $3,200,000. At the end of the accounting cycle the CFO of Paris Project Limited estimated that the new warehouse would have increased electricity and water usage from last year by 20%. Utility expenses (that comprised electricity and water) totaled $4,000,000 for the last full year. Required: At the end of the accounting cycle Paris Project Limited would have made adjustment entries to 'Interest Payable', 'Depreciation Expense, and 'Utility Expenses' of the following amounts? Select one: 0 O a. Debit. Depreciation Expense - $1,600,000; Credit. Interest Payable - $1,500,000; Debit. Utility Expense - $4,800,000 b. Debit. Depreciation Expense - $3,000,000; Credit. Interest Payable - $3,200,000; Debit. Utility Expense - $4,800,000 c. Credit. Depreciation Expense - $1,600,000; Debit. Interest Payable - $1,500,000; Credit. Utility Expense - $4,800,000 d. Credit. Depreciation Expense - $3,000,000; Debit. Interest Payable - $3,200,000; Credit. Utility Expense - $4,800,000
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