Question 1

If repossessed collateral is sold or otherwise disposed of by the creditor,the time,place,manner,and method of disposal must be:

Accepted Answer

A) commercially reasonable. 
B) scheduled with the debtor so that the debtor is able to attend. 
C) court ordered. 
D) perfected. 
A) commercially reasonable. 
B) scheduled with the debtor so that the debtor is able to attend. 
C) court ordered. 
D) perfected.

Question 2

Danson Corp.sends 15 snow blowers by rail to Gene Hardware.To show where the goods will be shipped and who gets them when they arrive,Danson will obtain ____,which can be used as collateral in a secured transaction.

Accepted Answer

A) a warehouse receipt. 
B) chattel paper. 
C) a bill of lading. 
D) a certificate of deposit. 
A) a warehouse receipt. 
B) chattel paper. 
C) a bill of lading. 
D) a certificate of deposit.

Question 3

Macig enters into a secured consumer debt transaction with Friendly Bank.When Macig pays the loan in full,Friendly Bank is required to file a statement indicating that it no longer claims a secured interest in the collateral.This statement must be filed within one month from the date the debt is fully paid.

Accepted Answer

A) True 
 B)False

Question 4

A security interest may be attached in electronic chattel paper.

Accepted Answer

A) True 
 B)False

Question 5

Goods that have become attached to real estate are called collaterals.

Accepted Answer

A) True 
 B)False

Question 6

Landscaper Lottie used her machinery,employee labor,and her expertise to landscape Opal's new guest home.Opal fails to pay for the landscaping because she has run out of money.Lottie files a lien against the real property.This lien is called:

Accepted Answer

A) an artisan's lien; her landscape design is a work of art. 
B) a landlord's lien; Opal is planning to rent the guest house to a tenant. 
C) a mechanic's lien; it was created by improving real property. 
D) a purchase money security interest. 
A) an artisan's lien; her landscape design is a work of art. 
B) a landlord's lien; Opal is planning to rent the guest house to a tenant. 
C) a mechanic's lien; it was created by improving real property. 
D) a purchase money security interest.

Question 7

At her neighbor's garage sale,Constance buys a vanity dressing table from her neighbor,Carlos,for $1600.Constance purchased the vanity table for her own personal use,without any knowledge that Carlos had signed a security agreement giving All Purpose Furniture,Inc.a security interest in the vanity table.All Purpose Furniture did not file a financing statement.Constance does not know that Carlos is still paying off the purchase money security interest and owes All Purpose Furniture,Inc.$1000.Under these circumstances:

Accepted Answer

A) Constance takes the vanity table subject to All Purpose's security interest because All Purpose's security interest automatically perfected.A perfected security interest takes priority. 
B) Constance takes the vanity table free of All Purpose's security interest because she is a buyer of consumer goods 
C) Constance takes the vanity table free of All Purpose's security interest because she is a buyer in the ordinary course of business. 
D) Constance must pay All Purpose $1000 or the table must be resold, and she and All Purpose will proportionately share the proceeds from the sale of the table. 
A) Constance takes the vanity table subject to All Purpose's security interest because All Purpose's security interest automatically perfected.A perfected security interest takes priority. 
B) Constance takes the vanity table free of All Purpose's security interest because she is a buyer of consumer goods 
C) Constance takes the vanity table free of All Purpose's security interest because she is a buyer in the ordinary course of business. 
D) Constance must pay All Purpose $1000 or the table must be resold, and she and All Purpose will proportionately share the proceeds from the sale of the table.

Question 8

The case Citizens Bank of Americus v.Federal Financial Services,Inc.deals with a conflict between a purchase money security interest and an earlier perfected interest.

Accepted Answer

A) True 
 B)False

Question 9

Edward bought a sports car from Luxury Imports by entering into a note and security agreement promising the car as collateral for the purchase money security interest.When Edward faced some tough financial times,he failed to make three monthly payments.Luxury Imports repossessed the car by removing the car wheels and advertised a public auction of the car.Edward appealed to his good friend Charles and managed to pay off the debt balance and Luxury's expenses of repossessing and advertising the sale.Edward's actions represent:

Accepted Answer

A) recollection. 
B) redemption. 
C) disposal of the collateral. 
D) termination. 
A) recollection. 
B) redemption. 
C) disposal of the collateral. 
D) termination.

Question 10

For a security interest to attach,there must be an agreement.

Accepted Answer

A) True 
 B)False

Question 11

Great State Bank and First Federal Bank have a security interest in TriColor's equipment.If neither secured party is perfected,the first to sue or repossess has priority over the collateral.

Accepted Answer

A) True 
 B)False

Question 12

First Bank loaned $400,000 to Thomas,taking a security interest in his yacht.Thomas defaulted on the loan and First Bank repossessed the boat.First Bank sold the yacht at a public sale.The sale yielded $50,000 more than the debt.First Bank:

Accepted Answer

A) must pay Thomas the $50,000. 
B) is entitled keep the $50,000. 
C) must share the $50,000 equally with Thomas. 
D) must pay the surplus to the Secretary of State. 
A) must pay Thomas the $50,000. 
B) is entitled keep the $50,000. 
C) must share the $50,000 equally with Thomas. 
D) must pay the surplus to the Secretary of State.

Question 13

A PMSI can be created only in goods and software.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is an example of a purchase money security interest in consumer goods?

Accepted Answer

A) A doctor purchasing a computer on credit to create a Webpage to make services and information available to her patients. 
B) A doctor purchasing on credit a blood glucose monitor to check his own blood sugar levels. 
C) A doctor purchasing a TV/VCR unit on credit to place in her office waiting room. 
D) A doctor purchasing an exercise bike for his employees to use over the lunch hour. 
A) A doctor purchasing a computer on credit to create a Webpage to make services and information available to her patients. 
B) A doctor purchasing on credit a blood glucose monitor to check his own blood sugar levels. 
C) A doctor purchasing a TV/VCR unit on credit to place in her office waiting room. 
D) A doctor purchasing an exercise bike for his employees to use over the lunch hour.

Question 15

Wedney,Inc.sold a meat processing machine to Yoro Chickens,taking a security interest in the machine.Yoro Chickens defaulted on the loan.Wedney repossessed the machine.Wedney would like to retain the machine to use as a model.Which of the following statements is correct?

Accepted Answer

A) Wedney must notify the debtor that it intends to retain the machine and give Yoro 20 days to object. 
B) By taking possession, Wedney automatically foreclosed on the collateral.Wedney has valid title and need do nothing else. 
C) Since the machine is equipment, Wedney cannot retain the machine.Wedney must dispose of the collateral in a commercially reasonable manner. 
D) Wedney can retain the machine but must pay Yoro the surplus, the difference between the fair market value of the machine and the amount of the debt. 
A) Wedney must notify the debtor that it intends to retain the machine and give Yoro 20 days to object. 
B) By taking possession, Wedney automatically foreclosed on the collateral.Wedney has valid title and need do nothing else. 
C) Since the machine is equipment, Wedney cannot retain the machine.Wedney must dispose of the collateral in a commercially reasonable manner. 
D) Wedney can retain the machine but must pay Yoro the surplus, the difference between the fair market value of the machine and the amount of the debt.

Question 16

On April 10,Amy agreed to buy a riding lawn mower from Mowers Plus,signing a promissory note and security agreement giving Mowers Plus a security interest in the mower.On April 15,Amy took delivery of the mower.On May 1,Mowers Plus filed a financing statement.Which of the following is correct?

Accepted Answer

A) Despite the agreement, Mowers Plus could not create a security interest in the mower since it is a consumer good. 
B) Mowers Plus has had attachment of a security interest in Amy's mower. 
C) Mowers Plus completed the attachment of a security interest in the mower when it filed the financing statement on May 1. 
D) The security interest has not attached, but attachment is unimportant to enforceability of a security interest. 
A) Despite the agreement, Mowers Plus could not create a security interest in the mower since it is a consumer good. 
B) Mowers Plus has had attachment of a security interest in Amy's mower. 
C) Mowers Plus completed the attachment of a security interest in the mower when it filed the financing statement on May 1. 
D) The security interest has not attached, but attachment is unimportant to enforceability of a security interest.

Question 17

A buyer in ordinary course of business takes the goods free of a security interest unless the security interest is perfected.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements about a buyer in ordinary course of business (BIOC)is true?

Accepted Answer

A) The BIOC takes the goods and is liable for the attached security interest provided it has been perfected. 
B) The BIOC takes the goods and is liable for the security interest if the goods are consumer goods. 
C) The BIOC takes the goods free of a security interest even though the security interest is perfected. 
D) None of the above is true. 
A) The BIOC takes the goods and is liable for the attached security interest provided it has been perfected. 
B) The BIOC takes the goods and is liable for the security interest if the goods are consumer goods. 
C) The BIOC takes the goods free of a security interest even though the security interest is perfected. 
D) None of the above is true.

Question 19

In the case In Re CFLC,Inc.,the court ruled that:

Accepted Answer

A) Expeditors had a security interest in Everex's goods because the latter were consumer goods. 
B) Expeditors' security interest in Everex's goods had not been perfected. 
C) Expeditors did not have a security interest in Everex's goods absent an agreement. 
D) Expeditor's security interest was void because it was obtained by fraud. 
A) Expeditors had a security interest in Everex's goods because the latter were consumer goods. 
B) Expeditors' security interest in Everex's goods had not been perfected. 
C) Expeditors did not have a security interest in Everex's goods absent an agreement. 
D) Expeditor's security interest was void because it was obtained by fraud.

Question 20

Country Bank,located in Indiana,loaned Chmelik $5,000 and obtained a security interest in a copyright Chmelik owns.Chmelik lives in Illinois,but works in Indiana.In order to perfect its interest,Country Bank files a financing statement in Indiana.The financing statement provides Chmelik's correct name,his business address,and a reasonable description of the copyright used as collateral.Is the financing statement sufficient?

Accepted Answer

A) Yes, it meets the UCC requirements for contents and filing. 
B) No, if the debtor is an individual, the secured party must file in the state of the debtor's principal residence, which in this case would be Illinois. 
C) No, the contents of the financing statement are incomplete. 
D) Both b and c are correct. 
A) Yes, it meets the UCC requirements for contents and filing. 
B) No, if the debtor is an individual, the secured party must file in the state of the debtor's principal residence, which in this case would be Illinois. 
C) No, the contents of the financing statement are incomplete. 
D) Both b and c are correct.

Exam 25: Secured Transactions

If repossessed collateral is sold or otherwise disposed of by the creditor,the time,place,manner,and method of disposal must be:

Danson Corp.sends 15 snow blowers by rail to Gene Hardware.To show where the goods will be shipped and who gets them when they arrive,Danson will obtain ____,which can be used as collateral in a secured transaction.

A security interest may be attached in electronic chattel paper.

Goods that have become attached to real estate are called collaterals.

Landscaper Lottie used her machinery,employee labor,and her expertise to landscape Opal's new guest home.Opal fails to pay for the landscaping because she has run out of money.Lottie files a lien against the real property.This lien is called:

The case Citizens Bank of Americus v.Federal Financial Services,Inc.deals with a conflict between a purchase money security interest and an earlier perfected interest.

For a security interest to attach,there must be an agreement.

Great State Bank and First Federal Bank have a security interest in TriColor's equipment.If neither secured party is perfected,the first to sue or repossess has priority over the collateral.

First Bank loaned $400,000 to Thomas,taking a security interest in his yacht.Thomas defaulted on the loan and First Bank repossessed the boat.First Bank sold the yacht at a public sale.The sale yielded $50,000 more than the debt.First Bank:

A PMSI can be created only in goods and software.

Which of the following is an example of a purchase money security interest in consumer goods?

Wedney,Inc.sold a meat processing machine to Yoro Chickens,taking a security interest in the machine.Yoro Chickens defaulted on the loan.Wedney repossessed the machine.Wedney would like to retain the machine to use as a model.Which of the following statements is correct?

On April 10,Amy agreed to buy a riding lawn mower from Mowers Plus,signing a promissory note and security agreement giving Mowers Plus a security interest in the mower.On April 15,Amy took delivery of the mower.On May 1,Mowers Plus filed a financing statement.Which of the following is correct?

A buyer in ordinary course of business takes the goods free of a security interest unless the security interest is perfected.

Which of the following statements about a buyer in ordinary course of business (BIOC)is true?

In the case In Re CFLC,Inc.,the court ruled that:

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