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| Stark, Inc. has $1,000,000 of notes payable due June 15, year 2. At the financial statement date of December 31, year 1, Stark signed an agreement to borrow up to $1,000,000 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 Stark was providing. At the date of issue of the December 31, year 1 financial statements, the value of the collateral was $1,200,000 and was not expected to fall below this amount during year 2. On the December 31, year 1 balance sheet, Stark should classify A. $1,000,000 of notes payable as long-term obligations. B. $1,000,000 of notes payable as short-term obligations. C. $40,000 of notes payable as short-term and $960,000 as long-term obligations. D. $200,000 of notes payable as short-term and $800,000 as long-term obligations. |