Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

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. C

Question 3

Green Landscape Company buys a backhoe on credit from Heavy Equipment Corporation,but does not make a payment on the loan for several months.Heavy repossesses the backhoe by towing it from a public street.Green sues Heavy for breach of the peace.Green will probably

Accepted Answer

A)   not prevail, because Heavy did not use judicial process.
B)   not prevail, because the repossession was not a breach of the peace.
C)   prevail, because Green did not default on the loan.
D)   prevail, because the repossession was a breach of the peace. B

Question 4

Idle Investments,Inc.,and Harbor Bank are secured parties with security interests in property owned by GR8 Manufacturing 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.
D)   the time the security agreement was signed.

Question 5

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 6

Sara needs $1,500 to buy textbooks and other school supplies.Tomas agrees to loan Sara $1,500,accepting as collateral Tomas'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 7

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.

Question 8

A purchase-money security interest in consumer goods is perfected automatically at the time of a credit sale.

Accepted Answer

A) True 
 B)False

Question 9

Fact Pattern 20-2
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 $500,000 from Interstate Bank, also for a security interest in the equipment. GLC defaults on the loans.
-Refer to Fact Pattern 20-2.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.

Question 10

A financing statement is effective for no more than five months from the date of filing.

Accepted Answer

A) True 
 B)False

Question 11

When two conflicting security interests are unperfected,the first to attach has priority.

Accepted Answer

A) True 
 B)False

Question 12

A pledge is a promise by a debtor to take reasonable care of the collateral.

Accepted Answer

A) True 
 B)False

Question 13

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.

Question 14

The person who owes the payment of a secured obligation is the secured party.

Accepted Answer

A) True 
 B)False

Question 15

To create an enforceable security interest,the secured party must give value.

Accepted Answer

A) True 
 B)False

Question 16

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.

Question 17

City Bank's financing statement in collateral owned by Delta Waters Corporation will expire in less than a year.Filed timely,a continuation statement could extend the effectiveness of the financing statement for

Accepted Answer

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

Question 18

An improper filing renders a secured party unperfected.

Accepted Answer

A) True 
 B)False

Question 19

The state office in which a financing statement should be filed depends on the creditor's location.

Accepted Answer

A) True 
 B)False

Question 20

The payment of Jose's debt to Klint is guaranteed by Jose's personal property.The process by which Klint can protect himself against the claims of third parties to this property is

Accepted Answer

A)   attachment.
B)   communication.
C)   perfection.
D)   search and seizure.

Exam 20: Security Interests in Personal Property

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

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

Green Landscape Company buys a backhoe on credit from Heavy Equipment Corporation,but does not make a payment on the loan for several months.Heavy repossesses the backhoe by towing it from a public street.Green sues Heavy for breach of the peace.Green will probably

Idle Investments,Inc.,and Harbor Bank are secured parties with security interests in property owned by GR8 Manufacturing Corporation.Priority between these security interests is generally determined by

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

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

A purchase-money security interest in consumer goods is perfected automatically at the time of a credit sale.

A financing statement is effective for no more than five months from the date of filing.

When two conflicting security interests are unperfected,the first to attach has priority.

A pledge is a promise by a debtor to take reasonable care of the collateral.

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

The person who owes the payment of a secured obligation is the secured party.

To create an enforceable security interest,the secured party must give value.

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

City Bank's financing statement in collateral owned by Delta Waters Corporation will expire in less than a year.Filed timely,a continuation statement could extend the effectiveness of the financing statement for

An improper filing renders a secured party unperfected.

The state office in which a financing statement should be filed depends on the creditor's location.

The payment of Jose's debt to Klint is guaranteed by Jose's personal property.The process by which Klint can protect himself against the claims of third parties to this property is