Sample Final Exam 1
True or False
Indicate whether the sentence or statement is true or false.
____ 1. Issues relating to checks are governed by both Articles 3 and 4 of the UCC.
____ 2. A bank that has certified a check is under no obligation to accept it.
____ 3. When a bank wrongfully dishonors a check, the bank is liable to the customer for damages.
____ 4. A bank may be subject to criminal prosecution if its customer writes a bad check.
____ 5. A bank must recredit a customer's account when it pays a check over the customer's forged signature only if the customer's negligence substantially contributed to the forgery.
____ 6. A customer has six months from the date of receipt of a statement of an electronic transfer to notify the financial institution of any errors.
____ 7. Personal property cannot serve as collateral for a valid security interest unless it is in the possession of the secured party.
____ 8. A purchase-money security interest arises when a seller or lender provides a buyer with the "purchase money" to buy goods.
____ 9. To eliminate inconsistencies between the description of collateral given in a security agreement from those given in the financing statement, it may be best to file the security agreement as a financing statement.
____ 10. A creditor with a mechanic's lien on property can prevent the sale of the property but cannot sell the property to satisfy the debt.
____ 11. An innkeeper's lien may be secured by its possession of the baggage of guests who have failed to pay their bills.
____ 12. To use attachment as a remedy, a creditor must have an enforceable right to payment of the debt.
____ 13. In some states, the judgment creditor must obtain a separate order of garnishment to cover each of the debtor's pay periods.
____ 14. A mortgagee has the right to foreclose on mortgaged property following the mortgagor's default.
____ 15. A contract of suretyship must be in writing to be enforceable.
____ 16. An artisan's lien is effective only if a creditor has possession of the property.
____ 17. A creditor's extension of time to a debtor for making payment, without the consent of the surety, will not discharge the surety.
____ 18. Bankruptcy proceedings are held in federal bankruptcy courts.
____ 19. Proof of claims by creditors must normally be filed within one year of the creditor's meeting with the debtor following the court's granting of the order for relief.
____ 20. The principal duty of a trustee is to liquidate and close up the debtor's estate as quickly as possible.
____ 21. A creditor with a purchase-money security interest may prevail against a trustee.
____ 22. Payment by a debtor filing for bankruptcy for services rendered within fifteen days before the payment is not a preference.
____ 23. Once a debtor files for bankruptcy, a secured creditor cannot recover more on a debt than the value of the collateral covering the debt.
____ 24. A discharge in bankruptcy will prevent a debtor from ever obtaining another discharge in bankruptcy.
____ 25. A debtor can cancel or rescind a reaffirmation agreement at any time prior to discharge or within sixty days of the filing of the agreement, whichever is later.
TRUE or FALSE Answers
1. T
2. F
3. T
4. F
5. F
6. F
7. F
8. T
9. T
10. F
11. T
12. T
13. T
14. T
15. F
16. T
17. F
18. T
19. F
20. T
21. T
22. T
23. F
24. F
25. T
Multiple Choice Questions
Identify the letter of the choice that best completes the statement or answers the question.
____ 26. Don receives his paycheck from Temporary Personnel, Inc. (TPI). He takes the check to First State Bank, TPI's bank, which refuses to cash it. He attempts to deposit the check in Community Bank, his bank, which also refuses to accept it. Don can recover from
a.
|
Community Bank only.
|
b.
|
First State Bank only.
|
c.
|
Community Bank or First State Bank.
|
d.
|
none of the above.
|
____ 27. Art agrees with First National Bank that it will honor Art's checks even when his account has insufficient funds. Art begins to issue many checks. The bank may
a.
|
dishonor any additional checks.
|
b.
|
dishonor any additional checks only if it requests adequate assurances that Art will honor the checks and Art fails to give such assurances.
|
c.
|
not dishonor Art's checks without incurring liability for any loss caused by its wrongful dishonor.
|
d.
|
none of the above.
|
____ 28. After Ada's death, her heirs Ben and Carol ask her secretary Sara to notify her bank, First Federal. On being notified, First Federal can pay or certify checks drawn by Ada, on or before the date of her death, for
a.
|
an indefinite period unless Ben or Carol asks to stop all payments.
|
b.
|
no time.
|
c.
|
one month after the date of death.
|
d.
|
ten days after the date of death unless Ben or Carol orders the bank to stop all payments.
|
____ 29. Sam, an accountant for Alpha Software, Inc., obtains a cashier's check to pay City Moving Company for City's move of Alpha's offices to a new building. Sam obtains certification of an Alpha check to pay Beta Computer Supplies Company, an Alpha supplier. Sam buys traveler's checks for a business trip to Europe. Sam, on Alpha's behalf, has no right to stop payment on
a.
|
the cashier's check.
|
b.
|
the certified check.
|
c.
|
the traveler's checks.
|
d.
|
none of the above.
|
Fact Pattern 27-2
Guy issues a check drawn on his account at First State Bank for $100 "to the order of Suzanne Rice," but the check is stolen by Harvey before Guy gives it to Suzanne. Harvey forges Suzanne's indorsement and cashes the check at Community Bank. Community presents the check to First State, which cashes it, debits Guy's account, and returns the check to Guy with his monthly statement.
____ 30. Refer to Fact Pattern 27-2. First State is excused from any liability if, after Guy receives the bank statement and canceled checks, he fails to report the forged indorsement within
a.
|
six months.
|
b.
|
one year.
|
c.
|
eighteen months.
|
d.
|
three years.
|
Fact Pattern 27-3
Lindy issues a check payable to Sam's Grocery. Sam's cashier forges Sam's indorsement and deposits the check in her bank account. Lindy's bank pays the check.
____ 31. Refer to Fact Pattern 27-3. Lindy can recover from
a.
|
her bank, which can recover from the cashier.
|
b.
|
her bank, which cannot recover from the cashier.
|
c.
|
the cashier, but not her bank.
|
d.
|
no one.
|
____ 32. First Federal Bank in New York has checks drawn on financial institutions in California and other states. These institutions also have checks drawn on banks located in different states. These checks are exchanged through
a.
|
the California Commercial Electronic Payments System.
|
b.
|
the Federal Reserve System.
|
c.
|
the New York Clearing House Interbank Payments System.
|
d.
|
the State Interchange Posting System.
|
Fact Pattern 27-4
Mark loses his bank access card. He realizes his loss the next day but waits a week to call the bank. Meanwhile, Ed finds and uses Mark's card to withdraw $3,000 from Mark's account.
____ 33. Refer to Fact Pattern 27-4. When Mark receives his bank statement, he demands that the bank investigate the matter and recredit his account. The bank
a.
|
has no duty to investigate.
|
b.
|
must investigate but need not recredit Mark's account.
|
c.
|
must investigate and, if the dispute is not resolved within ten days, recredit Mark's account (at least until the dispute is resolved).
|
d.
|
must investigate and immediately recredit Mark's account (at least until the dispute is resolved).
|
____ 34. Frances uses her access card to withdraw funds from her account once each month in January, March, and July. Under the Electronic Fund Transfer Act, Frances must be provided with a statement of her transactions monthly
a.
|
whether or not a transaction occurred.
|
b.
|
only when a transaction occurred.
|
c.
|
when a transaction occurred and quarterly regardless of use.
|
d.
|
none of the above.
|
____ 35. First National Bank wants to perfect its security interest in the property of Natural Mining Company. The most common method of perfecting a security interest is for the
a.
|
creditor to file a financing statement with the appropriate public office.
|
b.
|
creditor to retain possession of the collateral.
|
c.
|
debtor to give value to the creditor.
|
d.
|
debtor to retain rights in the property.
|
____ 36. Alpha Loans, Inc., takes possession of Bob's stock in International Corporation to perfect its security interest in the stock. This transfer is
a.
|
a pledge.
|
b.
|
a possessory lien.
|
c.
|
property after-acquired.
|
d.
|
a purchase-money security interest.
|
____ 37. Each of the following owns an All-Rite brand food processor: Diner's Restaurant; Eve, a consumer; Frank, a cooking-school student; and Great Deals, a discount store. As collateral, the processor that would be classified as inventory is owned by
a.
|
Diner's Restaurant.
|
b.
|
Eve.
|
c.
|
Frank.
|
d.
|
Great Deals.
|
Fact Pattern 28-1
Regis Motorcar Company manufactures automobiles that it sells through a variety of dealers, including Gambino's Autoworld. Gambino sells the cars to both consumers and businesses.
____ 38. Refer to Fact Pattern 28-1. A car in the possession of Gambino is probably
a.
|
a consumer good.
|
b.
|
a fixture.
|
c.
|
equipment.
|
d.
|
inventory.
|
____ 39. Refer to Fact Pattern 28-1. Molly, a consumer, purchases a car for use in her professional demolition derby tournaments. The car is
a.
|
a consumer good.
|
b.
|
a fixture.
|
c.
|
equipment.
|
d.
|
inventory.
|
____ 40. Refer to Fact Pattern 28-1. Ellen, a police officer, purchases a motorcycle for riding in the mountains on weekends during her spare time. The motorcycle is
a.
|
a consumer good.
|
b.
|
a fixture.
|
c.
|
equipment.
|
d.
|
inventory.
|
____ 41. First Federal Bank's financing statement in collateral owned by Omega Manufacturing Company will soon expire. A continuation statement could extend the effectiveness of the financing statement for
a.
|
six months.
|
b.
|
five years.
|
c.
|
indefinitely.
|
d.
|
none of the above.
|
____ 42. State Savings & Loan has a security interest in the proceeds from the sale of collateral owned by Brand's Outlet Store. This interest may remain perfected for longer than ten days after the store receives the proceeds if a filed financing statement covers the original collateral and the proceeds are
a.
|
collateral in which a security interest may be perfected by filing in the same office.
|
b.
|
identifiable cash proceeds.
|
c.
|
either a or b.
|
d.
|
none of the above
|
____ 43. A-1 Capital Company and First National Bank are secured parties with security interests in property owned by Interstate Commercial Corporation. The first security interest to be filed or perfected has priority over another filed or perfected security interest in
a.
|
all circumstances.
|
b.
|
states that have not adopted Article 9 of the UCC.
|
c.
|
states that require a security agreement to be signed and dated by the creditor.
|
d.
|
no circumstances.
|
Fact Pattern 29-1
Gary hires Home Construction Company to add a deck to the back of his house. When the deck is finished, Gary does not pay Home Construction for the work.
____ 44. Refer to Fact Pattern 29-1. Home Construction is
a.
|
a guarantor.
|
b.
|
a lien creditor.
|
c.
|
a surety.
|
d.
|
none of the above.
|
____ 45. Ollie, the proprietor of Ollie's Inn, is not paid by the Bessemers for providing them with overnight accommodations. Ollie's innkeeper's lien may be terminated
a.
|
only if the Bessemers pay their bill.
|
b.
|
only if Ollie gives the Bessemers their luggage.
|
c.
|
either a or b.
|
d.
|
none of the above.
|
____ 46. Beatrice obtains a judgment against Stan for a debt and wishes the sheriff to seize and sell any real or personal property owned by Stan. She must return to the court that issued the judgment and obtain a writ of
a.
|
attachment.
|
b.
|
execution.
|
c.
|
garnishment.
|
d.
|
none of the above.
|
____ 47. Kay, an employee of Lightspeed Internet Services, owes Master Credit Company $7,000. The extent to which her wages may be garnished to pay the debt is restricted by
a.
|
federal law only.
|
b.
|
state law only.
|
c.
|
federal law and state law.
|
d.
|
none of the above.
|
____ 48. Dan owes Sally $10,000. With a writ of attachment or execution, Sally can satisfy the debt from Dan's
a.
|
exempt property only.
|
b.
|
nonexempt property only.
|
c.
|
exempt or nonexempt property.
|
d.
|
none of the above.
|
____ 49. Geraldo owes $10,000 to Dave, $5,000 to Van, and $5,000 to Curt. The three creditors enter into an agreement with Geraldo to discharge the debts on payment of a sum of $10,000 to them, to be divided on proportionately. This agreement is
a.
|
an accord.
|
b.
|
an assignment.
|
c.
|
a composition agreement.
|
d.
|
a mortgage.
|
Fact Pattern 29-2
Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Carl, president and owner of Beta, asks First National Bank to loan Beta the funds.
____ 50. Refer to Fact Pattern 29-2. If First National insists that Carl sign the loan application, making himself personally liable for payment whether or not Beta defaults, Carl will be
a.
|
a guarantor only.
|
b.
|
a surety only.
|
c.
|
a guarantor and a surety.
|
d.
|
none of the above.
|
26. A
27. C
28. C
29. B
30. D
31. A
32. B
33. C
34. C
35. A
36. A
37. D
38. D
39. C
40. A
41. B
42. C
43. A
44. B
45. C
46. B
47. C
48. B
49. C
50. B
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