Question 1

George's Wholesale agrees to purchase 1,000 pounds of bananas from Chickadee Exports at 39 cents per pound.George's does not have the money for the bananas now,but promises to pay in two months.Chickadee Exports wants to make the sale,but is worried about waiting for the payment,knowing the bananas are not "appealing" collateral. So,Chickadee prepares an instrument claiming George's $400 sorting machine as collateral.George's never signs the agreement,but accepts the shipment of bananas.This is an example of a:

Accepted Answer

A)  check. 
B)  security interest. 
C)  promissory note. 
D)  None of the above.

Question 2

First Federal loaned Madeline $20,000 to purchase a new van.The van was for Madeline's personal and family use.First Federal's security interest is a purchase money security interest which perfects only upon filing a financing statement.

Accepted Answer

A) True 
 B)False

Question 3

Micky,a mechanic,repaired Daphane's Dodge.Daphane failed to pay the repair bill of $595.Since Micky was still had possession of the car,he could therefore give notice of foreclosure on the car.

Accepted Answer

A) True 
 B)False

Question 4

Maddie enters into a secured consumer debt transaction with Friendly Bank.When Maddie 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 5

Fixtures are goods which are attached to real estate so they are not covered by article ( of the UCC.

Accepted Answer

A) True 
 B)False

Question 6

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.

Question 7

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.

Question 8

Wedney,Inc.has a purchase money security interest in one of Yoro Chicken's meat processing machines.Wedney filed a financing statement on the day the machine was delivered,perfecting its interest.Great State Bank already had a security interest in the machine.Which party has superior priority rights in the meat processing machine?

Accepted Answer

A)  Wedney.A PMSI in collateral other than inventory takes priority over a conflicting security interest if the PMSI is perfected at the time the debtor receives the collateral or within 20 days after he receives it. 
B)  Great State Bank,since it had an earlier security interest. 
C)  The party who is first to repossess the collateral. 
D)  The creditors have equal priority.

Question 9

Great State Bank loans money to Seth,securing the loan with property owned by Seth.Great State Bank is advised by its attorney to file a financing statement.Great State Bank doesn't understand why it should spend the extra money for this filing,since Seth has told them that he has no other creditors.Why should Great State Bank file a financing statement?

Accepted Answer

A)  There are criminal penalties for failing to file. 
B)  The financing statement allows Great State Bank to repossess the collateral on default without a court order. 
C)  The financing statement will protect Great State's priority rights with other creditors by giving notice to other creditors that it claims a security interest in the collateral. 
D)  Filing the financing statement is necessary to complete the attachment requirement in order to create a security interest.

Question 10

Pharm-Ace holds a patent on a drug.Pharm-Ace used the patent (evidenced by the patent certificate)to secure a $1 million loan from First Bank.The patent is chattel paper.

Accepted Answer

A) True 
 B)False

Question 11

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.

Question 12

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 13

Patents and copyrights are considered goods in which a security interest can attach and be perfected.

Accepted Answer

A) True 
 B)False

Question 14

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.

Question 15

Great State Bank took a security interest in Gresham,Inc.'s meat processing equipment.Gresham defaulted on the loan.Which statement is correct?

Accepted Answer

A)  Great State Bank may take possession of the collateral. 
B)  Great State Bank may ignore its rights in the collateral and sue Gresham for the money owed. 
C)  Both a and b are courses of action that Great State Bank may follow. 
D)  Neither a nor b are courses of action that Great State Bank may follow.

Question 16

Article 9 applies to any transaction intended to create a security interest in real property.

Accepted Answer

A) True 
 B)False

Question 17

At her neighbor's garage sale,Constance buys a vanity dressing table from her neighbor,Carlos,for $160.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.$400.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 $400 or the table must be resold,and she and All Purpose will proportionately share the proceeds from the sale of the table.

Question 18

A PMSI can be created only in goods and software.

Accepted Answer

A) True 
 B)False

Question 19

Ken decided to open a retail boat dealership.He expects that many of his sales will be credit sales.What should Ken do to protect his interests in the collateral in the credit sales that he makes?

Accepted Answer

The answer of Ken decided to open a retail boat...

Question 20

Who has priority

Accepted Answer

A)  perfected over non perfected; 
B)  when not perfected; first to attach. 
C)  both perfected ; first to file. 
D)  all of the above

Exam 15: Secured Transactions

First Federal loaned Madeline $20,000 to purchase a new van.The van was for Madeline's personal and family use.First Federal's security interest is a purchase money security interest which perfects only upon filing a financing statement.

Micky,a mechanic,repaired Daphane's Dodge.Daphane failed to pay the repair bill of $595.Since Micky was still had possession of the car,he could therefore give notice of foreclosure on the car.

Fixtures are goods which are attached to real estate so they are not covered by article ( of the UCC.

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

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

Pharm-Ace holds a patent on a drug.Pharm-Ace used the patent (evidenced by the patent certificate)to secure a $1 million loan from First Bank.The patent is chattel paper.

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.

Patents and copyrights are considered goods in which a security interest can attach and be perfected.

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:

Great State Bank took a security interest in Gresham,Inc.'s meat processing equipment.Gresham defaulted on the loan.Which statement is correct?

Article 9 applies to any transaction intended to create a security interest in real property.

A PMSI can be created only in goods and software.

Ken decided to open a retail boat dealership.He expects that many of his sales will be credit sales.What should Ken do to protect his interests in the collateral in the credit sales that he makes?

Who has priority