ABC reports the liability on the balance sheet as a $1 million current liability, and a $4 million long-term liability.
A current liability is a liability that is payable within 12 months or one year.
On the other hand, a long-term liability is a liability that is payable after 12 months or one year.
Since $1 million is payable in each of the next five years, this implies $1 million is payable within one year while $4 million is payable after one year.
Therefore, ABC reports the liability on the balance sheet as a $1 million current liability, and a $4 million long-term liability.
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