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Exam 32: Credit and Security

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Question 21

Multiple Choice

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Equity Bank lends funds to Fabrication Company to add a storage unit to Fabrication's factory. Payment of the loan is guaranteed by Fabrication's supply of inventory. The law covering this transaction comes from

A) local building ordinances.
B) state manufacturing regulations.
C) federal banking rules.
D) the Uniform Commercial Code.

E) B) and C)
F) None of the above

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Question 22

Multiple Choice

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The payment of Cathy's debt to Debt Collection Corporation is guaranteed by Cathy's personal property. Debt Collection is most likely to perfect its interest by

A) insuring the property for the full amount of its value.
B) calculating the precise amount of the debt.
C) correcting grammatical errors in the parties' written agreement.
D) filing a financing statement with the appropriate authority.

E) C) and D)
F) None of the above

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Question 23

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An artisan's lien is a security device through which a creditor can recover payment for labor and materials furnished in the repair of personal property.

Liens generally do not take priority over other claims to the same property.

The right of contribution is a right that the debtor has to receive contributions from the surety or guarantor.

Market Credit Inc. is the secured party in a secured transaction with National Sales Corporation. Market Credit is

Rancho West owes Silo & Barn Inc. $5,000 on their contract for building a barn, but refuses to pay. To collect, Silo files a mechanic's lien, under which security for the debt is represented by

A creditor can request that certain property of a debtor be seized to pay a debt.

A court's order to seize a debtor's property is known as a writ of attachment if it is issued after a judgment.

Irma delivers her Jeep to be fixed at Kent's Auto Repair. Irma agrees to pay cash. Kent's performs, but Irma does not pay. Kent's keeps the Jeep until she pays. This is

A secured party perfects a claim by filing a financing statement with the debtor.

Rosalyn inherits a diamond and ruby necklace from her mother that is in need of cleaning and reinforcement for the settings that hold the jewels. She takes the necklace to Janice's Jewelry Repair. Rosalyn pays 10 percent of the price in cash in advance with an agreement to pay the rest in cash when she picks it up. Janice finishes the work, and contacts Rosalyn who refuses to pay the rest of the price. What options does Janice have?   Explain how the option(s) work.

Owen is given value by Payday Sales & Finance Company in the form of a commitment to sell goods on credit. In terms of creating an enforceable security interest, this is

Auto Sales & Finance wants to get paid for its goods and services, so it will not sell goods or lend funds unless payment is guaranteed by some personal property and not just by a promise. This is the concept of

Fact Pattern 32-1 Petro Refinery asks Quality Bank for a loan to increase its inventory. Quality requires Rob, Petro's president, to sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to make a sale of refined oil to Slick Lubricants Inc., Petro asks Slick's outside accountant Tina to co-sign a credit application. Refer to Fact Pattern 32-1. Tina signs the application. According to the terms, if Slick defaults, Petro can look to her for payment without first pursuing legal remedies against Slick. Tina is

Fact Pattern 32-1 Petro Refinery asks Quality Bank for a loan to increase its inventory. Quality requires Rob, Petro's president, to sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to make a sale of refined oil to Slick Lubricants Inc., Petro asks Slick's outside accountant Tina to co-sign a credit application. Refer to Fact Pattern 32-1.  After the loan agreement is signed, Slick agrees to a higher rate of interest without telling Tina. Tina is

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

Improper filing of a financing statement can render the security interest unperfected.

A floating lien is a security interest retained in collateral that may actually change like when inventory turns over.

A lien protects a creditor's claim for the payment of a debt.