Question 1

A buyer in the ordinary course of business has priority over any security interest created by the seller.

Accepted Answer

A) True 
 B)False

Question 2

The payment of Brian's debt to Chuck is guaranteed by Brian's personal property.This is

Accepted Answer

A) a reorganization. 
B) a secured transaction. 
C) a suretyship agreement. 
D) a violation of most state laws. 
A) a reorganization. 
B) a secured transaction. 
C) a suretyship agreement. 
D) a violation of most state laws.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Intermittent advances against a line of credit can be subject to the same collateral.

Accepted Answer

A) True 
 B)False

Question 5

Hal's Hardware store defaults on a debt to Intrastate Bank,which takes possession of the collateral securing the debt.Intrastate sells the collateral.The proceeds from the sale are applied first to

Accepted Answer

A) Hal's debt to Intrastate. 
B) Hal's debts to other creditors. 
C) Intrastate's fees for the sale. 
D) payments Hal's made on the debt to Intrastate. 
A) Hal's debt to Intrastate. 
B) Hal's debts to other creditors. 
C) Intrastate's fees for the sale. 
D) payments Hal's made on the debt to Intrastate.

Question 6

Rich Financial,Inc. ,files a financing statement regarding a transaction with Supreme Business Company.To be valid,the financing statement must contain all of the following except

Accepted Answer

A) a description of the collateral. 
B) a statement of the purpose for the transaction. 
C) Rich's name. 
D) Standard's name. 
A) a description of the collateral. 
B) a statement of the purpose for the transaction. 
C) Rich's name. 
D) Standard's name.

Question 7

Fact Pattern 18-2
General Leasing Company (GLC) buys equipment for use as inventory, borrow¬ing $1 million from Helpful Finance Corporation for a security in¬terest in the equipment. The next day, GLC borrows $513,000 from Interstate Bank, also for a security interest in the equipment. GLC defaults on the loans.
-Refer to Fact Pattern 18-2.Suppose that Helpful perfects its security interest when GLC takes possession of the equipment.In that circumstance,the party with priority to the collateral on GLC's default would be

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.

Question 8

A continuation statement is effective only if it is filed within six months before the expiration of a financing statement.

Accepted Answer

A) True 
 B)False

Question 9

Khalil holds a security interest in inventory owned by Luc.Khalil assigns his interest in the inventory to Mal.Mal becomes the secured party of record

Accepted Answer

A) automatically. 
B) if Khalil advises Luc of the assignment. 
C) if Mal advises Luc of the assignment. 
D) if Mal files a uniform amendment form. 
A) automatically. 
B) if Khalil advises Luc of the assignment. 
C) if Mal advises Luc of the assignment. 
D) if Mal files a uniform amendment form.

Question 10

The payment of Hu's debt to Ian is guaranteed by Hu's personal property.To give public notice of his interest in Hu's property,Ian is most likely to

Accepted Answer

A) attach a bright label to Hu's property. 
B) e-mail other potential creditors. 
C) file a financing statement with the appropriate authority. 
D) publish a collection notice in local newspapers. 
A) attach a bright label to Hu's property. 
B) e-mail other potential creditors. 
C) file a financing statement with the appropriate authority. 
D) publish a collection notice in local newspapers.

Question 11

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 12

Proceeds consist of whatever is received when collateral is sold.

Accepted Answer

A) True 
 B)False

Question 13

A security interest cannot be perfected without the filing of a financing statement.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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

Accepted Answer

A) governed by Article 2 of the UCC. 
B) governed by Article 3 of the UCC. 
C) governed by Article 9 of the UCC. 
D) not governed by the UCC. 
A) governed by Article 2 of the UCC. 
B) governed by Article 3 of the UCC. 
C) governed by Article 9 of the UCC. 
D) not governed by the UCC.

Question 16

Efrem owns Fans & Players,a retail sporting goods shop.When Great Hill Lodge,a new ski resort,is built in the area,Efrem decides to expand and borrows a large sum from Hometown Bank.The bank takes a security interest in Efrem's present inventory and any after-acquired inventory as collateral for the loan.The bank properly perfects the security interest by filing a financing statement.Efrem's business is profitable,and he begins doubling his inventory.A year later,an avalanche destroys the ski slope and lodge.Efrem's business takes a turn for the worse,and he defaults on his debt to the bank.The bank seeks possession of his entire inventory,even though the inventory is twice as large as it was when the loan was made.Efrem claims that the bank has rights to only half of his inventory.Is Efrem correct? Explain.

Accepted Answer

No.Hometown Bank will prevail because it

Question 17

The payment of Yves's debt to Zac is guaranteed by Yves's personal property.Their agreement describes Yves's subject property by serial number.To establish Zac's interest,this is

Accepted Answer

A) irrelevant. 
B) not sufficient. 
C) sufficient if it accurately describes the parties' agreement. 
D) sufficient unless it is too tedious to review. 
A) irrelevant. 
B) not sufficient. 
C) sufficient if it accurately describes the parties' agreement. 
D) sufficient unless it is too tedious to review.

Question 18

An improper filing renders a secured party unperfected.

Accepted Answer

A) True 
 B)False

Question 19

A future advance against a line of credit must be of the same type as the original advance to be subject to the same collateral.

Accepted Answer

A) True 
 B)False

Question 20

Select Furniture Store sells household consumer goods.To create a purchase-money security interest,Select Furniture must

Accepted Answer

A) assign,to a collecting agent,a portion of its accounts payable. 
B) assign,to a collecting agent,a portion of its accounts receivable. 
C) extend credit for part or all of the purchase price of the goods. 
D) refer purchasers to a third-party lender. 
A) assign,to a collecting agent,a portion of its accounts payable. 
B) assign,to a collecting agent,a portion of its accounts receivable. 
C) extend credit for part or all of the purchase price of the goods. 
D) refer purchasers to a third-party lender.

Exam 18: Security Interests in Personal Property

A buyer in the ordinary course of business has priority over any security interest created by the seller.

The payment of Brian's debt to Chuck is guaranteed by Brian's personal property.This is

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

Intermittent advances against a line of credit can be subject to the same collateral.

Hal's Hardware store defaults on a debt to Intrastate Bank,which takes possession of the collateral securing the debt.Intrastate sells the collateral.The proceeds from the sale are applied first to

Rich Financial,Inc. ,files a financing statement regarding a transaction with Supreme Business Company.To be valid,the financing statement must contain all of the following except

A continuation statement is effective only if it is filed within six months before the expiration of a financing statement.

Khalil holds a security interest in inventory owned by Luc.Khalil assigns his interest in the inventory to Mal.Mal becomes the secured party of record

The payment of Hu's debt to Ian is guaranteed by Hu's personal property.To give public notice of his interest in Hu's property,Ian is most likely to

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

Proceeds consist of whatever is received when collateral is sold.

A security interest cannot be perfected without the filing of a financing statement.

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

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

The payment of Yves's debt to Zac is guaranteed by Yves's personal property.Their agreement describes Yves's subject property by serial number.To establish Zac's interest,this is

An improper filing renders a secured party unperfected.

A future advance against a line of credit must be of the same type as the original advance to be subject to the same collateral.

Select Furniture Store sells household consumer goods.To create a purchase-money security interest,Select Furniture must

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Torts and Cyber Torts

Intellectual Property and Internet Law

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Consideration,capacity,and Legality

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Third Party Rights and Discharge

Breach and Remedies

The Formation of Sales and Lease Contracts

Performance Breach of Sales Lease Contracts

Warranties and Product Liability

Negotiability,transferability,and Liability

Checks and Banking in the Digital Age

Creditors Rights and Bankruptcy

Mortgages Foreclosures After the Recession

Agency Relationships

Management Perspective: Independent-Contractor Negligence

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International Law in a Global Economy

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