Reed’s Appliances purchased $50,000 in inventory on credit from Whirlpool, with Whirlpool taking a security interest in Reed’s inventory on May 1, 2019. Whirlpool recorded a financing statement on May 3, 2019. The appliances were delivered by Whirlpool to Reed’s on May 14, 2019. On May 10, 2019, Reed’s Appliances opened a line of credit with FCB Bank for $500,000. FCB took a security interest in Reed’s inventory on May 10 and recorded a financing statement on May 11, 2019. Reed first drew on the FCB line of credit on May 15, 2019. Reed’s Appliances was insolvent by August 2019 and filed for bankruptcy. Which of the following statements is correct about the proceeds from the sale of Reed’s inventory?

Group of answer choices

FCB Bank has first priority in the proceeds.

FCB Bank has second priority because there was no draw on the credit line until May 15, 2019.

Because FCB did not notify Whirlpool of its interest before filing the financing statement, FCB cannot be a perfected secured party.

Whirlpool has first priority because its interest attached first.

Answer rating: 100% (QA)

ANSWER FCB has first priority in the proceeds First company has to pay off all bankrupt... View the full answer