Use the table for the question(s)below.
-The above diagram shows a balance sheet for a certain company. All quantities shown are in millions of dollars. How would the balance sheet change if the company's long-term assets were judged to depreciate at an extra $5 million per year?
A)Net property, plant, and equipment would rise to $187 million, and Total Assets and Shareholders' Equity would be adjusted accordingly.
B)Net property, plant, and equipment would fall to $177 million, and Total Assets and Shareholders' Equity would be adjusted accordingly.
C)Long-term Liabilities would fall to $172 million, and Total Liabilities and Shareholders' Equity would be adjusted accordingly.
D)Long-term Liabilities would rise to $182 million, and Total Liabilities and Shareholders' Equity would be adjusted accordingly.

Question

Use the table for the question(s)below. 
-The above diagram shows a balance sheet for a certain company. All quantities shown are in millions of dollars. How would the balance sheet change if the company's long-term assets were judged to depreciate at an extra $5 million per year?
A)Net property, plant, and equipment would rise to $187 million, and Total Assets and Shareholders' Equity would be adjusted accordingly. 
B)Net property, plant, and equipment would fall to $177 million, and Total Assets and Shareholders' Equity would be adjusted accordingly. 
C)Long-term Liabilities would fall to $172 million, and Total Liabilities and Shareholders' Equity would be adjusted accordingly. 
D)Long-term Liabilities would rise to $182 million, and Total Liabilities and Shareholders' Equity would be adjusted accordingly.

Quizplus · Accepted Answer

If the company's long-term assets were judged to depreciate at an extra $5 million per year, the Net property, plant, and equipment would decrease by $5 million per year. Therefore, after 1 year, the Net property, plant, and equipment would be $182 million ($187 million - $5 million), and after 5 years it would be $177 million ($187 million - $25 million). This would result in a decrease in Total Assets and Shareholders' Equity by the same amount. Therefore, the correct answer is B.

Use the Table for the Question(s)below