(Multiple Choice)

1. CPA QUESTION: Under the UCC Secured Transactions Article, perfection of a security interest by a creditor provides added protection against other parties in the event the debtor does not pay its debts. Which of the following parties is not affected by perfection of a security interest?

A. Other prospective creditors of the debtor

B. The trustee in a bankruptcy case

C. A buyer in the ordinary course of business

D. A subsequent personal injury judgment creditor

2. CPA QUESTION: Mars, Inc. manufactures and sells VCRs on credit directly to wholesalers, retailers, and consumers. Mars can perfect its security interest in the VCRs it sells without having to file a financing statement or take possession of the VCRs if the sale is made to which of the following:

A. Retailers

B. Wholesalers that sell to distributors for resale

C. Consumers

D. Wholesalers that sell to buyers in ordinary course of business

3. Bank has loaned unsecured money to Retailer, which still owes $700,000. Bank becomes nervous that Retailer is on the verge of bankruptcy, and sends a “notice of security interest” to Retailer, claiming a security interest in all inventory and real estate of Retailer. Retailer does not respond. Bank files its notice in the state’s central filing office. When Retailer goes bankrupt, Bank

A. Has a perfected security interest in the inventory but not the real estate

B. Has a perfected security interest in the real estate but not the inventory

C. Has a perfected security interest in both the real estate and the inventory

D. Has no security interest in either the real estate or the inventory

E. Has an unperfected security interest in both the real estate and the inventory

4. Which case does not represent a purchase money security interest?

A. Auto dealer sells consumer a car on credit.

B. Wholesaler sells retailer 5,000 pounds of candy on credit.

C. Bank lends money to Retailer, using Retailer’s existing inventory as collateral.

D. Bank lends money to auto dealer to purchase 150 new cars, which are the collateral.

E. Consumer applies to credit agency for loan with which to buy a yacht.

5. Millie lends Arthur, her next-door neighbor, $25,000. He gives her his diamond ring as collateral for the loan. Which statement is true?

A. Millie has no valid security interest in the ring because the parties did not enter into a security agreement.

B. Millie has no valid security interest in the ring because she has not filed appropriate papers.

C. Millie has an attached, unperfected security interest in the ring.

D. Millie has an attached, unperfected security interest in the ring but can perfect her interest by filing.

E. Millie has an attached, perfected security interest in the ring.