The Above Diagram Shows a Balance Sheet for a Certain

question 70

Multiple Choice

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 $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.

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Definitions:

Reserves

Funds or physical resources set aside, often by businesses or governments, to meet future expenses, emergencies, or for specific purposes.

Reserve Ratio

The fraction of deposits that a bank is required to hold in reserve and not lend out, as mandated by the central bank.

Goldsmith's Receipts

Historical documents representing deposits made with goldsmiths that evolved into a form of early banking, where receipts functioned as proof of money or valuables deposited for safekeeping.

Money Supply

The aggregate amount of monetary assets available within a country, encompassing notes, coins, and digital balances, influencing an economy's inflation and interest rates.