Question 1

The amount of money owed in a debt is called the principal.

Accepted Answer

A) True 
 B)False

Question 2

Liquidation takes place though ____________ unless otherwise ordered by the court.

Accepted Answer

A)  a sale at a public auction
B)  eBay
C)  a private dispersal sale
D)  an estate sale
E)  a fixed price auctionF) C) and D)
G) A) and D)

Question 3

Debts of the bankrupt under Chapter 13:

Accepted Answer

A)  are all discharged
B)  are discharged,if they involve past taxes
C)  are discharged,if they involve alimony
D)  are discharged only in part
E)  are not dischargedF) A) and D)
G) None of the above

Question 4

Capacity refers to:

Accepted Answer

A)  a company's ability to extend credit to a customer
B)  the debtor's assets to secure debt
C)  the debtor's financial condition
D)  the debtor's reputation
E)  none of the other choices are correctF) A) and E)
G) A) and B)

Question 5

The _________ agrees to make the payment,such as the bank making a payment based on a document presented to it.

Accepted Answer

A)  drawee
B)  drawer
C)  payee
D)  checker
E)  beneficiaryF) D) and E)
G) All of the above

Question 6

Bankruptcy discharge is:

Accepted Answer

A)  illegal
B)  when a third party steps in to pay the debtor's debts
C)  when creditors forgive all debt
D)  the final stage of the bankruptcy proceeding for individuals
E)  none of the other choices are correctF) A) and C)
G) A) and D)

Question 7

Perfecting a claim to a security interest may involve filing the claim with a state official.

Accepted Answer

A) True 
 B)False

Question 8

If an instrument is found to be negotiable under the UCC,it may be freely traded without concern for any existing contract responsibilities if the instrument is in the possession of a holder in due course.To be a holder in due course,one must:

Accepted Answer

A)  accept the transfer of the instrument with the same contract responsibilities as the person assigning the instrument
B)  give value for the instrument,accept it without knowledge of any defects (for example,that it is overdue) ,and take the instrument in good faith
C)  present himself as having knowledge or skill specialized to the transaction and regularly deal in that kind of transaction
D)  demonstrate that the instrument falls within the scope of Article 3 of the UCC,that the transaction is not for the sale of a tangible product,and that any defects in the title to the goods involved in the transaction is not known to the party
E)  none of the other choices,there are no special requirementsF) C) and D)
G) A) and D)

Question 9

Tiny borrows $20,000 from First Bank.Mike is the surety on the loan.Tiny defaults and First Bank requires Mike to pay the balance of the loan.In this case,Mike may sue:

Accepted Answer

A)  First for violating its guarantor obligations
B)  First for defrauding him
C)  Tiny to reimburse or exonerate him
D)  Tiny to enslave himself to Mike
E)  First to exonerate himF) A) and D)
G) B) and E)

Question 10

A check must be paid:

Accepted Answer

A)  on demand
B)  at a later date
C)  no later than 3 months after it is issued
D)  within the year it is issued
E)  none of the other choices are correctF) A) and E)
G) A) and B)

Question 11

A floating lien must be renewed each time a customer purchases more goods on credit to add to the account.

Accepted Answer

A) True 
 B)False

Question 12

In Fordyce Bank and Trust v.Bean Timberland,the bank lent Bean money to buy timber from landowners.Bean gave the bank security interests in the timber,which he sold to lumber companies that milled the logs into lumber.When Bean defaulted on the loan,the bank tried to collect from the lumber companies because it had a secured interest in the timber.The courts held that:

Accepted Answer

A)  since there was abundant evidence that purchasing gatewood without performing a lien search was the standard practice in the timber industry,the timber companies had no duty to perform a lien search and so there was no breach of duty
B)  since there no evidence that purchasing gatewood without performing a lien search was the standard practice in the timber industry,the timber companies had a duty to perform a lien search and so there was a breach of duty
C)  without more evidence,the court could not decide whether purchasing gatewood without performing a lien search was the standard practice in the timber industry
D)  the case should be dismissed because neither side could present sufficient evidence regarding whether purchasing gatewood without performing a lien search was the standard practice in the timber industry
E)  none of the other choices are correctF) B) and D)
G) D) and E)

Question 13

A business is a(n) ____________when it has the ability to take some of the nonpaying customers' property to satisfy the debt.

Accepted Answer

A)  general creditor
B)  financed creditor
C)  collateral creditor
D)  real creditor
E)  none of the other choices are correctF) A) and B)
G) A) and C)

Question 14

The party to receive a payment from a negotiable instrument is called the payee.

Accepted Answer

A) True 
 B)False

Question 15

Most companies that file Chapter 11 bankruptcies have assets worth:

Accepted Answer

A)  more than $1 million
B)  less than $1 million
C)  more than $1 billion
D)  more than $5 billion
E)  at least $5 millionF) B) and E)
G) C) and D)

Question 16

A principal has rights to be subrogated by the surety.

Accepted Answer

A) True 
 B)False

Question 17

To make a security interest subject to better enforcement,the creditor should make
sure the interest is attached and perfected.

Accepted Answer

A) True 
 B)False

Question 18

FACT Pattern 12-1
Gena owns Gena's Gourmet Pasta.She sold her pasta only in New Jersey.It was a success and the company expanded throughout the Northeast.During expansion Gena borrowed $350,000 from First Fidelity Bank.Because Gena was a new company,First Fidelity required that a third party also guarantee the loan.Marvin guaranteed her loan.
Everything looked good at Gena's Gourmet Pasta until January 2009,when Larry's Linguine opened.Larry was a hard competitor and soon Gena was losing business.The sales reduction meant Gena had a hard time making her payments to First Fidelity.After six months,Gena defaulted on her loan.Unable to meet her bills,Gena called it quits in September 2008,and filed for bankruptcy.
Please answer multiple-choice questions 1 to 10 based on these facts.
-Refer to Fact Pattern 12-1.When Fidelity was deciding whether or not to lend Gena money,which of the following resources could it have possibly used?

Accepted Answer

A)  a pasta maker's trade association,if Gena was a member
B)  Gena's financial statements
C)  records of her transactions with other banks
D)  reports from credit agencies
E)  any or all of theseF) All of the above
G) C) and E)

Question 19

Every year approximately ______________ businesses use a Chapter 11 bankruptcy.

Accepted Answer

A)  1 million
B)  500,000
C)  1.5 million
D)  100,000
E)  none of the other choices are correctF) B) and E)
G) A) and B)

Question 20

Even though a person is declared bankrupt,he or she will still have to pay child support,if they have a legal obligation to do so.

Accepted Answer

A) True 
 B)False

Exam 12: Negotiable Instruments, credit, and Bankruptcy

Most companies that file Chapter 11 bankruptcies have assets worth:

Correct Answer
verified

A check must be paid:

Correct Answer
verified

Liquidation takes place though ____________ unless otherwise ordered by the court.

Correct Answer
verified

The party to receive a payment from a negotiable instrument is called the payee.

Correct Answer
verified

The amount of money owed in a debt is called the principal.

Correct Answer
verified

Every year approximately ______________ businesses use a Chapter 11 bankruptcy.

Correct Answer
verified

Tiny borrows $20,000 from First Bank.Mike is the surety on the loan.Tiny defaults and First Bank requires Mike to pay the balance of the loan.In this case,Mike may sue:

Correct Answer
verified

Even though a person is declared bankrupt,he or she will still have to pay child support,if they have a legal obligation to do so.

Correct Answer
verified

To make a security interest subject to better enforcement,the creditor should make sure the interest is attached and perfected.

Correct Answer
verified

The _________ agrees to make the payment,such as the bank making a payment based on a document presented to it.

Correct Answer
verified

Capacity refers to:

Correct Answer
verified

If an instrument is found to be negotiable under the UCC,it may be freely traded without concern for any existing contract responsibilities if the instrument is in the possession of a holder in due course.To be a holder in due course,one must:

Correct Answer
verified

A principal has rights to be subrogated by the surety.

Correct Answer
verified

A business is a(n) ____________when it has the ability to take some of the nonpaying customers' property to satisfy the debt.

Correct Answer
verified

Debts of the bankrupt under Chapter 13:

Correct Answer
verified

Bankruptcy discharge is:

Correct Answer
verified

A floating lien must be renewed each time a customer purchases more goods on credit to add to the account.

Correct Answer
verified

Perfecting a claim to a security interest may involve filing the claim with a state official.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exam 12: Negotiable Instruments, credit, and Bankruptcy

Most companies that file Chapter 11 bankruptcies have assets worth:

Correct AnswerverifiedShow Answer

A check must be paid:

Correct AnswerverifiedShow Answer

Liquidation takes place though ____________ unless otherwise ordered by the court.

Correct AnswerverifiedShow Answer

The party to receive a payment from a negotiable instrument is called the payee.

Correct AnswerverifiedShow Answer

The amount of money owed in a debt is called the principal.

Correct AnswerverifiedShow Answer

Every year approximately ______________ businesses use a Chapter 11 bankruptcy.

Correct AnswerverifiedShow Answer

Tiny borrows $20,000 from First Bank.Mike is the surety on the loan.Tiny defaults and First Bank requires Mike to pay the balance of the loan.In this case,Mike may sue:

Correct AnswerverifiedShow Answer

Even though a person is declared bankrupt,he or she will still have to pay child support,if they have a legal obligation to do so.

Correct AnswerverifiedShow Answer

To make a security interest subject to better enforcement,the creditor should make sure the interest is attached and perfected.

Correct AnswerverifiedShow Answer

The _________ agrees to make the payment,such as the bank making a payment based on a document presented to it.

Correct AnswerverifiedShow Answer

Capacity refers to:

Correct AnswerverifiedShow Answer

If an instrument is found to be negotiable under the UCC,it may be freely traded without concern for any existing contract responsibilities if the instrument is in the possession of a holder in due course.To be a holder in due course,one must:

Correct AnswerverifiedShow Answer

A principal has rights to be subrogated by the surety.

Correct AnswerverifiedShow Answer

A business is a(n) ____________when it has the ability to take some of the nonpaying customers' property to satisfy the debt.

Correct AnswerverifiedShow Answer

Debts of the bankrupt under Chapter 13:

Correct AnswerverifiedShow Answer

Bankruptcy discharge is:

Correct AnswerverifiedShow Answer

A floating lien must be renewed each time a customer purchases more goods on credit to add to the account.

Correct AnswerverifiedShow Answer

Perfecting a claim to a security interest may involve filing the claim with a state official.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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