Question 1

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

Accepted Answer

A)   ​the balance of Dave's debt to the bank.
B)   ​Dave's debts to other creditors.
C)   ​the bank's expenses for the sale.
D)   ​the minimum amount Dave's needs to stay in business. C

Question 2

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

Accepted Answer

A) True 
 B)False  False

Question 3

Gina borrows from Regional Loan Company the funds to buy a car. The car secures the debt. Gina defaults on the loan. Regional takes possession of the car, planning to sell it to recover some of the unpaid debt. Before the creditor sells the car or enters into a contract for its sale, Gina can pay what she owes and take back the car. This is​

Accepted Answer

A)   ​a deficiency judgment.
B)   ​a floating lien.
C)   ​the right of redemption.
D)   ​the right of retention. C

Question 4

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

Accepted Answer

A)   ​the county clerk.
B)   ​the mayor.
C)   ​the state lumbermen's association.
D)   ​the secretary of state.

Question 5

Capital Projects, Inc., files a financing statement to provide notice of its security interest in the property of Data Network Corporation. The initial effective term of a financing statement is a period of​

Accepted Answer

A)   ​five days.
B)   ​five months.
C)   ​five weeks.
D)   ​five years.

Question 6

In most situations, the state office in which a financing statement should be filed depends on the location of the collateral.

Accepted Answer

A) True 
 B)False

Question 7

On default, a secured party who chooses not to retain the collateral must dispose of it in a commercially reasonable manner.

Accepted Answer

A) True 
 B)False

Question 8

A financing statement cannot be the same as the security agreement.

Accepted Answer

A) True 
 B)False

Question 9

Sara needs $1,500 to buy textbooks and other school supplies. Tomas agrees to loan Sara $1,500, accepting as collateral Sara's car. They put their agreement in writing and sign it. Sara keeps possession of the car. Does Tomas have an enforceable security interest? How can Tomas let other creditors know of his interest in the car?

Accepted Answer

The answer of Sara needs $1,500 to buy textbooks and...

Question 10

The payment of Janitorial Service's debt to Business Finance, Inc., is guaranteed by the service's personal property. Business Finance is​

Accepted Answer

A)   ​a debtor.
B)   ​a secured creditor.
C)   ​a security interest.
D)   ​a secured party.

Question 11

EZ Loans, Inc., issues a line of credit in Glade Electronics Corporation under a security agreement. Later, Glade buys new HD-TVs to add to its inventory. EZ has a security interest in the new inventory​

Accepted Answer

A)   ​if the security agreement included an after-acquired property clause.
B)   ​if EZ has not yet filed a financing statement.
C)   ​if Glade bought the inventory with EZ funds.
D)   ​under no circumstances.

Question 12

A security agreement does not need to contain a description of the collateral.

Accepted Answer

A) True 
 B)False

Question 13

The concept of a floating lien applies to a constantly changing inventory.

Accepted Answer

A) True 
 B)False

Question 14

Ken's Auto Sales borrows money from Lenders Finance Corporation under a security agreement. With the money, Ken's buys six Mazda Miatas. The vehicles are​

Accepted Answer

A)   ​beyond the extent of Lenders's interest.
B)   ​after-acquired property.
C)   ​a future advance.
D)   ​proceeds.

Question 15

The payment of Chick's debt to Diamond is guaranteed by Chick's collection of eight restored autos. Their agreement describes Chick's subject property by serial number. To establish Diamond's interest, this is​

Accepted Answer

A)   ​not sufficient because it is too specific.
B)   ​not sufficient if it matches the description in the financing statement.
C)   ​sufficient if it accurately describes the parties' agreement.
D)   ​not sufficient without an added description of the autos' other identifying characteristics.

Question 16

Attachment gives the creditor an enforceable security interest in the collateral.

Accepted Answer

A) True 
 B)False

Question 17

Rural Financial Corporation is a secured party with a security interest in property owned by Strawberry Fields, Inc. Perfection of this security interest may not protect Rural Financial against the claim of​

Accepted Answer

A)   ​a bank.
B)   ​a buyer in the ordinary course of business.
C)   ​a subsequent lien creditor.
D)   ​a trustee in bankruptcy.

Question 18

A secured party is any creditor who has a security interest in a debtor's collateral.

Accepted Answer

A) True 
 B)False

Question 19

Where and how to perfect a security interest sometimes depends on the classification of the collateral.

Accepted Answer

A) True 
 B)False

Question 20

Brass & Woodwind Instruments, Inc., allows Clifton to keep a professional clarinet that he bought from Brass & Woodwind even though he has not paid the full price. Brass & Woodwind's legally sufficient financing statement in the goods need not include​

Accepted Answer

A)   ​a description of the collateral.
B)   ​a statement of the reason for allowing Clifton to take the goods.
C)   ​Brass & Woodwind's name.
D)   ​Clifton's name.

Exam 20: Secured Transactions

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

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

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

Capital Projects, Inc., files a financing statement to provide notice of its security interest in the property of Data Network Corporation. The initial effective term of a financing statement is a period of​

In most situations, the state office in which a financing statement should be filed depends on the location of the collateral.

On default, a secured party who chooses not to retain the collateral must dispose of it in a commercially reasonable manner.

A financing statement cannot be the same as the security agreement.

The payment of Janitorial Service's debt to Business Finance, Inc., is guaranteed by the service's personal property. Business Finance is​

EZ Loans, Inc., issues a line of credit in Glade Electronics Corporation under a security agreement. Later, Glade buys new HD-TVs to add to its inventory. EZ has a security interest in the new inventory​

A security agreement does not need to contain a description of the collateral.

The concept of a floating lien applies to a constantly changing inventory.

Ken's Auto Sales borrows money from Lenders Finance Corporation under a security agreement. With the money, Ken's buys six Mazda Miatas. The vehicles are​

The payment of Chick's debt to Diamond is guaranteed by Chick's collection of eight restored autos. Their agreement describes Chick's subject property by serial number. To establish Diamond's interest, this is​

Attachment gives the creditor an enforceable security interest in the collateral.

Rural Financial Corporation is a secured party with a security interest in property owned by Strawberry Fields, Inc. Perfection of this security interest may not protect Rural Financial against the claim of​

A secured party is any creditor who has a security interest in a debtor's collateral.

Where and how to perfect a security interest sometimes depends on the classification of the collateral.

Brass & Woodwind Instruments, Inc., allows Clifton to keep a professional clarinet that he bought from Brass & Woodwind even though he has not paid the full price. Brass & Woodwind's legally sufficient financing statement in the goods need not include​

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

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

Capital Projects, Inc., files a financing statement to provide notice of its security interest in the property of Data Network Corporation. The initial effective term of a financing statement is a period of

The payment of Janitorial Service's debt to Business Finance, Inc., is guaranteed by the service's personal property. Business Finance is

EZ Loans, Inc., issues a line of credit in Glade Electronics Corporation under a security agreement. Later, Glade buys new HD-TVs to add to its inventory. EZ has a security interest in the new inventory

Ken's Auto Sales borrows money from Lenders Finance Corporation under a security agreement. With the money, Ken's buys six Mazda Miatas. The vehicles are

The payment of Chick's debt to Diamond is guaranteed by Chick's collection of eight restored autos. Their agreement describes Chick's subject property by serial number. To establish Diamond's interest, this is

Rural Financial Corporation is a secured party with a security interest in property owned by Strawberry Fields, Inc. Perfection of this security interest may not protect Rural Financial against the claim of

Brass & Woodwind Instruments, Inc., allows Clifton to keep a professional clarinet that he bought from Brass & Woodwind even though he has not paid the full price. Brass & Woodwind's legally sufficient financing statement in the goods need not include