Mann_BLRB 9_TB_Ch38

Business Law and the Regulation of Business

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Chapter 38—Secured Transactions and Suretyship TRUE/FALSE 1. According to Article 9 of the UCC, a computer purchased by a CPA for use in her office will be classi- fied as inventory. ANS: F TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 2. Willton Bros. obtains from Marbowe Manufacturing a line of credit of $25,000, of which Willton ini- tially uses $12,000 for purchase of inventory. Marbowe may only have a security interest in the invent- ory that covers the initial $12,000 advance. ANS: F TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 3. Article 9 of the UCC is flexible, simple, and it allows a variety of forms of secured financing. ANS: T TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 4. Article 9 of the UCC applies to a security interest without consent that arises by operation of law, such as a mechanic's lien. ANS: F TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 5. Under Article 9 of the UCC, "value" may include past consideration such as an antecedent debt. ANS: T TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 6. "Perfection" is required in order for the secured party to enforce rights against the debtor. ANS: F TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 7. The most common method of perfecting a security interest under Article 9 is filing a completed finan- cing statement. ANS: T TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 8. Hank's tractor is collateral for a loan and Hank moves to the next county. In most states, the security instrument must be re-filed in the proper county or it will render the security interest ineffective. ANS: F TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 9. A pledge used to secure a loan must be signed by all parties to the agreement.
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ANS: F TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 10. Temporary 20-day automatic perfection of a negotiable instrument would prevent any future holder of the instrument from taking priority. ANS: F TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 11. A security interest is ineffective against the debtor until it "attaches." ANS: T TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 12. A buyer in the ordinary course of business takes collateral (other than farm products) free of any secur- ity interest created by the buyer's seller, even if the security interest is perfected and the buyer knows of its existence. ANS: T TOP: AICPA BB-Legal | AICPA BB-Resource Management MSC: AACSB Analytic 13. If the debtor is in default and the secured party wants to repossess the collateral in order to sell it, he must get a court order to do so. ANS: F
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Mann_BLRB 9_TB_Ch38 - Chapter 38-Secured Transactions and...

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