The above diagram shows a balance sheet for a certain company
Balance Sheet
Assets Liabilities
Current Assets Current Liabilities
Cash 48 Accounts payable 35
Accounts receivable 25 Notes payable/short-term debt 5
Inventories 16
Total current assets 89 Total current liabilities 40
Long-Term Assets Long-Term Liabilities
Net property, plant,
and equipment 121 Long-term debt 137
Total long-term assets 121 Total long-term liabilities 137
Total Liabilities 177
Stockholders' Equity 33
Total Assets 210 Total Liabilities and 210
Stockholders' Equity
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 $126 million, and total assets and stockholders' equity would be adjusted accordingly.
B) Net property, plant, and equipment would fall to $116 million, and total assets and stockholders' equity would be adjusted accordingly.
C) Long-term liabilities would rise to $131 million, and total liabilities and stockholders' equity would be adjusted accordingly.
D) Long-term liabilities would fall to $111 million, and total liabilities and stockholders' equity would be adjusted accordingly.
Answer: B
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