Question 1

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 2

Florence borrows $1,500 from Fremont,leaving her gold necklace with Fremont as collateral.Two weeks earlier,Florence had borrowed $1,000 from Corner Bank.Florence signed a security agreement and a financing statement giving Corner Bank a security interest in the same gold necklace.The financing statement is filed in the appropriate location.If Florence defaults on both loans,which creditor has the superior rights to the necklace?

Accepted Answer

A)  Fremont, because his loan was the first to attach. 
B)  Fremont, because possession takes priority over filing. 
C)  Corner Bank, because Fremont did not perfect his interest. 
D)  Corner Bank, because Fremont did not have a written security agreement.

Question 3

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 4

The initial term for which a financing statement will be effective is:

Accepted Answer

A)  one year. 
B)  five years. 
C)  ten years. 
D)  two years.

Question 5

Explain the difference between attachment and perfection.

Accepted Answer

The answer of Explain the difference between attachment and perfection....

Question 6

Revised Article 9 of the UCC only applies to goods and does not include intangibles such as accounts or chattel paper.

Accepted Answer

A) True 
 B)False

Question 7

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 8

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.

Question 9

Faith owns a copyright in a book she recently wrote.She applies for a $10,000 loan through Cumberland Bank and wants to use the copyright as collateral.Explain if and how the bank can perfect a security interest in such collateral.

Accepted Answer

The answer of Faith owns a copyright in a book...

Question 10

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 11

All but which of the following may be used as collateral in a secured transaction under UCC Revised Article 9?

Accepted Answer

A)  Bank deposit accounts. 
B)  Personal injury tort claims of individuals. 
C)  Tort claims of a corporation. 
D)  A computer program if, by purchasing a computer, the buyer of the computer acquires the right to use that embedded program. 
E)  Both b and c.

Question 12

Micky,a mechanic,repaired Daphane's Dodge.Daphane failed to pay the repair bill of $595.Since Micky was still storing the car,he could therefore claim a landlord's lien on the car.

Accepted Answer

A) True 
 B)False

Question 13

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

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.

Question 15

To perfect a security interest in a negotiable instrument,Second State Savings and Loan should:

Accepted Answer

A)  file a financing statement. 
B)  take possession of the instrument. 
C)  do nothing. Perfection is automatic. 
D)  secure a court order.

Question 16

Wanderlust gave a security interest in his Conestoga wagon to Iowa Bank who perfected its security interest by filing a financing statement with the appropriate officials in Iowa.Five months later,Wanderlust hit the trail again,moving to Montana.If Iowa Bank wants to continue its perfected interest in the Conestoga wagon,it should:

Accepted Answer

A)  file a continuation statement for another five years in Iowa before Wanderlust moves on. 
B)  re-perfect by filing a financing statement in the appropriate place in Montana, according to Montana law, within four months of Wanderlust's entering Montana. 
C)  repossess the Conestoga wagon. 
D)  file a continuation statement for another four months in Iowa before Wanderlust moves on.

Question 17

A security interest in money may be perfected by:

Accepted Answer

A)  filing a financing statement. 
B)  creating a PMSI. 
C)  possession only. 
D)  redemption.

Question 18

Masterview,Inc.purchased a new computer system,which included some computer programs.When Masterview developed financial troubles,two competing creditors of Masterview claimed the right to repossess the computer system and the programs.The UCC distinguishes "software" from "goods" and treats them differently for some purposes,which would be important in this situation.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 24: Secured Transactions

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?

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:

The initial term for which a financing statement will be effective is:

Explain the difference between attachment and perfection.

Revised Article 9 of the UCC only applies to goods and does not include intangibles such as accounts or chattel paper.

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?

Faith owns a copyright in a book she recently wrote.She applies for a $10,000 loan through Cumberland Bank and wants to use the copyright as collateral.Explain if and how the bank can perfect a security interest in such collateral.

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.

All but which of the following may be used as collateral in a secured transaction under UCC Revised Article 9?

Micky,a mechanic,repaired Daphane's Dodge.Daphane failed to pay the repair bill of $595.Since Micky was still storing the car,he could therefore claim a landlord's lien on the car.

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

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

To perfect a security interest in a negotiable instrument,Second State Savings and Loan should:

A security interest in money may be perfected by:

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