Question: $4$ Ames, Inc., has $$1$ million of notes payable due June $15,$ Year $2.$ At the financial

$2\mathrm{.}1\mathrm{.}28$

statement date of December $31,$ Year $1,$ Ames signed an agreement to borrow up

to $$1$ million to refinance the notes payable on a long$-$term basis. The financing

agreement called for borrowings not to exceed $80\%$ of the value of the collateral

Ames was providing. At the date of issue of the December $31,$ Year $1,$ financial

statements, the value of the collateral was $$1\mathrm{.}2$ million and was not expected to

fall below this amount during Year $2.$ In its December $31,$ Year $1,$ balance sheet,

Ames should classify the notes payable as

Short$-$Term Long$-$Term

Obligations Obligations

A$.$ $$0$$$1,000,000$

B$.$ $$40,000$$$960,000$

C$.$ $$200,000$$$800,000$

D$.$ $$1,000,000$$$0$