TBCh24F - CHAPTER 24 Debtor-Creditor Relations and...

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C H A P T E R 2 4 Debtor-Creditor Relations and Bankruptcy T RUE -F ALSE Q UESTIONS 1. A commitment to make a loan must always be in writing. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 2. Commercial paper is a term that describes short-term corporate indebtedness. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 3. A revolving loan is based upon the continuous extension of credit of unlimited amount. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 4. A commitment fee is an amount a lender requires as consideration for its promise to keep a commitment to loan available. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 5. Agreements for term or revolving loans may call for mandatory prepayment when certain events occur. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 6. In order to reflect the greater risk to the lender, secured loans are priced at a higher rate than unsecured loans. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 7. If a borrower fails to repay a secured loan, the lender, may foreclose on the collateral. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 107
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MANAGERS AND THE LEGAL ENVIRONMENT 8. Under a guaranty of collection, the guarantor becomes obliged to pay only after the lender has attempted unsuccessfully to collect the amount due from the primary debtor. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 9. National banks acting as lenders are subject to state usury laws. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 10. After-acquired property is property that the debtor acquires after the repayment of a loan under a security agreement. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 11. The UCC provides that, unless otherwise agreed, a security agreement gives the secured party a security interest in the proceeds if collateral is sold, exchanged, collected, or otherwise disposed of. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 12. A debt subordination is an agreement whereby one or more creditors of a common debtor agree to defer payment of their claims until the debtor is solvent again. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 13. A creditor’s claim in bankruptcy may be involuntarily postponed through application of the doctrine of equitable subordination. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 14. Chapter 13 does not provide a bankruptcy discharge for corporations. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 15. A repayment plan under a Chapter 11 bankruptcy must either be accepted unanimously or pass the “best interests of creditors” test. ANSWER:
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TBCh24F - CHAPTER 24 Debtor-Creditor Relations and...

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