Multiple choice questions related to basic accounts.
1.Which of the following elements must exist for there to be a valid, enforceable security agreement?
a.A written security agreement.
b.The creditor must give value to the debtor.
c.The debtor must have an interest in the collateral.
d.A, B, and C.
e.B and C only.
2.Article 9 of the UCC does not cover a security interest in the following:
a.Land.
b.Inventory.
c.Equipment.
d.Patents and copyrights.
3.In order for a security interest to give the secured party protection against the claims of other creditors of the debtor, the security interest must:
a.Terminate the debtor's interest.
b.Attach to the subject matter.
c.Become perfected.
d.Entitle the creditor to possession.
4.Which of the following is true about security agreements and financing statements?
a.These are two terms for essentially the same document.
b.Both must be filed in order to perfect a security agreement.
c.Both must exist in order for a security interest to attach.
d.The financing statement gives constructive notice to the world of the existence of the related security agreement.
e.The security agreement is unenforceable until a financing statement has been filed.
5.Which of the following items does not need to be included in a financing statement?
a.The debtor's name.
b.The debtor's mailing address.
c.The secured party's name.
d.A description of the collateral.
e.What constitutes a default in the underlying loan agreement?
6.Which of the following are rules established by the UCC when determining priority among conflicting claims of creditors?
a.A secured creditor's interest is equal to an unsecured creditor's interest.
b.A perfected security interest has priority over a mere interest in the same collateral.
c.If there is two or more perfected security interest in the same collateral, the last to perfect has priority as it is the most recent interest that has been filed.
d.All of these are correct.
7. A creditor who has repossessed collateral may choose to retain it:
a.In all circumstances.
b.In all circumstances unless the secured party receives an appropriate notice within 21 days.
c.In all circumstances when the debtor willfully did not pay the debt.
d.In all circumstances unless the secured party receives an appropriate notice within 21 days or in the case of consumer goods, if more than 60 percent of the price has been paid.
8. Ajax Corporation borrowed $50,000 from National Bank, giving National a security interest in its factory equipment. The agreement stated that the equipment would be security for this $50,000 loan and any future loans that National made to Ajax. National filed a valid financing statement. Over the next several months, Ajax borrowed another $100,000 from National. No additional financing statements were filed. Ajax has not made any payments on its loans from National. Ajax defaults on these loans. National wants to foreclose on the collateral. Assuming this security agreement is valid and perfected, how much of National's debt is secured?
a.None, because this was not a purchase money situation.
b.Only the first $50,000 because financing statements were not filed on the last $100,000.
c.Only the first $50,000 because future advances clauses are not valid.
d.The entire $150,000 is secured.
9. Which of the following is true about the distinction between secured and unsecured credit?
a.Secured debt is debt that has already been paid, and unsecured has not yet been paid.
b.Secured debt is expected to be collected, whereas collection of unsecured debt is doubtful.
c.Secured debt will be collected over more than 1 year, whereas unsecured debt is expected to be collected within 1 year.
d.Secured debt has collateral associated with it, whereas unsecured debt has no associated collateral.
e.Secured debt results from a judgment of the court, whereas unsecured debt results from the agreement of the parties.
10.When a debtor fails to pay a debt, and the value of the collateral is less than the full amount of the debt, which of the following is generally true?
a.The creditor can obtain a deficiency judgment against the debtor for the amount of the debt that was not satisfied from the collateral.
b.The creditor must absorb the remaining loss and has no further remedy.
c.The creditor must file a bankruptcy proceeding against the debtor in order to obtain further relief.
d.The creditor must record its security interest before proceeding further.