Question 1

Advances against lines of credit can be subject to a perfected security interest in identified collateral.

Accepted Answer

A) True 
 B)False  True

Question 2

Fact Pattern 32-1General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1 million from Helpful Finance Corporation for a security interest in the equipment. The next day, GLC borrows $500,000 from Interstate Bank, also for a security interest in the equipment. GLC defaults on the loans.
-Refer to Fact Pattern 32-1.Suppose that two weeks after GLC takes possession of the equipment,Helpful and Interstate file financing statements,with Interstate filing first.In that circumstance,the party with priority to the equipment is

Accepted Answer

A)  ​GLC. 
B)  ​Helpful and Interstate proportionately. 
C)  ​Helpful only. 
D)  ​Interstate only. 
A)  ​GLC. 
B)  ​Helpful and Interstate proportionately. 
C)  ​Helpful only. 
D)  ​Interstate only. D

Question 3

A security interest is enforceable only if the debtor has title to the collateral.

Accepted Answer

A) True 
 B)False  False

Question 4

Olaf is the creditor in a transaction with Phil.Once certain requirements are met,Olaf's rights will attach,which means that Olaf will have

Accepted Answer

A)  ​an indivisible ownership right to Phil's property. 
B)  ​an enforceable security interest in Phil's property. 
C)  ​a notice affixed to Phil's  property. 
D)  ​the permission of a court to seize Phil's property. 
A)  ​an indivisible ownership right to Phil's property. 
B)  ​an enforceable security interest in Phil's property. 
C)  ​a notice affixed to Phil's  property. 
D)  ​the permission of a court to seize Phil's property.

Question 5

Angie borrows $20,000 from First Line Credit using a field of timber trees as collateral.To perfect its security interest,First Line Credit must file its financing statement with

Accepted Answer

A)  ​the county clerk. 
B)  ​the mayor. 
C)  ​the city counsel. 
D)  ​​the secretary of state. 
A)  ​the county clerk. 
B)  ​the mayor. 
C)  ​the city counsel. 
D)  ​​the secretary of state.

Question 6

The payment of John's debt to Kirsten is guaranteed by John's personal property.Kirsten is most likely to perfect her interest by

Accepted Answer

A)  ​attaching a bright label to John's property. 
B)  ​calculating the precise amount of John's debt. 
C)  ​correcting grammatical errors in the parties' written agreement. 
D)  ​filing a financing statement with the appropriate authority. 
A)  ​attaching a bright label to John's property. 
B)  ​calculating the precise amount of John's debt. 
C)  ​correcting grammatical errors in the parties' written agreement. 
D)  ​filing a financing statement with the appropriate authority.

Question 7

Once default has occurred and the secured party has obtained possession of the collateral,the secured party has no more options.

Accepted Answer

A) True 
 B)False

Question 8

A floating lien cannot apply to the proceeds of the sale of after-acquired property.

Accepted Answer

A) True 
 B)False

Question 9

Whatever a secured party obtains on a sale of collateral is all that he or she can collect on the debt.

Accepted Answer

A) True 
 B)False

Question 10

Natural Resource Investment Company and Mega Bank are secured parties with security interests in property owned by LNG Gas Corporation.Between these security interests,the first to be filed or perfected has priority over other filed or perfected security interests in

Accepted Answer

A)  ​most circumstances. 
B)  ​no circumstances. 
C)  ​states that have not adopted Article 9 of the UCC. 
D)  ​states that require a security agreement to be signed and dated by the creditor. 
A)  ​most circumstances. 
B)  ​no circumstances. 
C)  ​states that have not adopted Article 9 of the UCC. 
D)  ​states that require a security agreement to be signed and dated by the creditor.

Question 11

The failure to pay a debt as promised is known as default.

Accepted Answer

A) True 
 B)False

Question 12

Perfection is usually accomplished without filing a financing statement.

Accepted Answer

A) True 
 B)False

Question 13

Proceeds from the disposition of collateral after default are distributed in a certain order with any surplus generally going to the debtor.

Accepted Answer

A) True 
 B)False

Question 14

The payment of Mo's debt to Neil is guaranteed by Mo's personal property.This is governed by

Accepted Answer

A)  ​the Uniform Commercial Code. 
B)  ​the Federal Trade Commission. 
C)  ​the U.S. Constitution's commerce clause. 
D)  ​the Bankruptcy Reform Act of 2005. 
A)  ​the Uniform Commercial Code. 
B)  ​the Federal Trade Commission. 
C)  ​the U.S. Constitution's commerce clause. 
D)  ​the Bankruptcy Reform Act of 2005.

Question 15

The first security interest to be perfected is the last in priority over any other perfected security interests.

Accepted Answer

A) True 
 B)False

Question 16

Most of the customers in any business are buyers in the ordinary course of business.

Accepted Answer

A) True 
 B)False

Question 17

Sweetwater Café defaults on debts to Town & Country Bank and Uno Loan Company.Town & Country perfected its security interest before Uno.Town & Country takes possession of the collateral in which it has a security interest.On a sale of the collateral,the proceeds will be applied first to

Accepted Answer

A)  ​Sweetwater's previous payments on the debts. 
B)  ​Sweetwater's unpaid payments on the debts. 
C)  ​the balance of Sweetwater's debt to Town & Country. 
D)  ​the balance of Sweetwater's debt to Uno. 
A)  ​Sweetwater's previous payments on the debts. 
B)  ​Sweetwater's unpaid payments on the debts. 
C)  ​the balance of Sweetwater's debt to Town & Country. 
D)  ​the balance of Sweetwater's debt to Uno.

Question 18

A financing statement must include the creditor's signature.

Accepted Answer

A) True 
 B)False

Question 19

Lena borrows from Mac and Nicol,using the same collateral for both loans.Only Nicol has a perfected security interest.Lena defaults on both loans.The party with first rights to the collateral is

Accepted Answer

A)  ​Lena. 
B)  ​Mac and Nicol, in proportion to Lena's debt to each. 
C)  ​Mac only. 
D)  ​Nicol only. 
A)  ​Lena. 
B)  ​Mac and Nicol, in proportion to Lena's debt to each. 
C)  ​Mac only. 
D)  ​Nicol only.

Question 20

Debit & Credit Financing,Inc.,and Equity Lending Company are secured parties with security interests in property owned by Fleet Shipping Corporation.Priority between these security interests is generally determined by

Accepted Answer

A)  ​the amount of the claim. 
B)  ​the custom in the trade. 
C)  ​the time of perfection or attachment. 
D)  ​the "float" of the liens. 
A)  ​the amount of the claim. 
B)  ​the custom in the trade. 
C)  ​the time of perfection or attachment. 
D)  ​the "float" of the liens.

Exam 32: Secured Transactions

Advances against lines of credit can be subject to a perfected security interest in identified collateral.

A security interest is enforceable only if the debtor has title to the collateral.

Olaf is the creditor in a transaction with Phil.Once certain requirements are met,Olaf's rights will attach,which means that Olaf will have

Angie borrows $20,000 from First Line Credit using a field of timber trees as collateral.To perfect its security interest,First Line Credit must file its financing statement with

The payment of John's debt to Kirsten is guaranteed by John's personal property.Kirsten is most likely to perfect her interest by

Once default has occurred and the secured party has obtained possession of the collateral,the secured party has no more options.

A floating lien cannot apply to the proceeds of the sale of after-acquired property.

Whatever a secured party obtains on a sale of collateral is all that he or she can collect on the debt.

Natural Resource Investment Company and Mega Bank are secured parties with security interests in property owned by LNG Gas Corporation.Between these security interests,the first to be filed or perfected has priority over other filed or perfected security interests in

The failure to pay a debt as promised is known as default.

Perfection is usually accomplished without filing a financing statement.

Proceeds from the disposition of collateral after default are distributed in a certain order with any surplus generally going to the debtor.

The payment of Mo's debt to Neil is guaranteed by Mo's personal property.This is governed by

The first security interest to be perfected is the last in priority over any other perfected security interests.

Most of the customers in any business are buyers in the ordinary course of business.

Sweetwater Café defaults on debts to Town & Country Bank and Uno Loan Company.Town & Country perfected its security interest before Uno.Town & Country takes possession of the collateral in which it has a security interest.On a sale of the collateral,the proceeds will be applied first to

A financing statement must include the creditor's signature.

Lena borrows from Mac and Nicol,using the same collateral for both loans.Only Nicol has a perfected security interest.Lena defaults on both loans.The party with first rights to the collateral is

Debit & Credit Financing,Inc.,and Equity Lending Company are secured parties with security interests in property owned by Fleet Shipping Corporation.Priority between these security interests is generally determined by

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