Business Law Test 3 Set 1

10. If a debtor refuses to pay an unsecured creditor, and the debtor is insolvent, the unsecured creditor collects: a. nothing b. one-half of the bill c. one-quarter of the bill d. the full amount of the bill, over time e. the bill plus associated attorney's fees

a

14. 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 the bank: a. gets nothing from the timber companies, they were not responsible for the security interests and breached no duty to the bank b. collect the unpaid balance of the loan from the timber companies, depending on how much secured timber they bought from Bean c. collect the unpaid balance of the loan from the timber companies, which are each jointly and severally responsible under UCC 4-320, which sets strict standards for security interests d. collect the unpaid balance of the loan from the timber companies only if it can show that the companies had been notified by the bank each time they accepted timber from Bean e. none of the other choices

a

3. In Lor-Mar/Toto v. Constitution Bank, where the bank cashed bogus checks written on Lor-Mar's company account and the checks had signatures that looked like the stamped signatures Lor-Mar used, the courts held: a. the bank was strictly liable under the UCC for making payments on forged checks b. the bank was liable under the UCC for negligence in not noticing that the checks used in the forgery were on the wrong paper c. the bank was not liable because, under the UCC, if the signature looks like a valid stamped signature, the bank has not violated its duty of care d. the bank was not liable because Lor-Mar carelessly allowed others to get copies of its check blanks e. none of the other choices

a

7. TP sells franchises in the Old Fast Food chain. TP sells a franchise to Choi for $100,000 by cashier's check. Choi then hears that TP is going out of business and tries to stop payment on the check. TP has already transferred the money to a third party who meets the UCC's requirements for a holder in due course. The bank paid that third party. TP declares it is out of business. In a subsequent lawsuit: a. the court will find that the third party is a holder in due course and, despite the fact that TP has defrauded Choi, not require the third party to repay Choi b. because of the fraud involved, the court will require the third party repay Choi c. because the instrument involved was a cashier's check and not an ordinary check, the court will not require the third party to repay Choi d. because the amount in controversy was more than $50,000, the courts will be empowered to view the fraud as a felony and will ignore the requirements of the UCC e. none of the other choices

a

13. Inventory may be used as collateral for a loan. If it is, the inventory is classified as: a. intangible property b. tangible property c. intellectual property d. real property e. gross property

b

17. The most common lien on personal property is: a. a mechanic's lien b. a possessory lien c. an integrated lien d. a mortgage lien e. a potential lien

b

23. Refer to Fact Pattern 13-1. If Jeanette does incorporate, the corporation legally can last: a. for 20 years, after which she needs to apply for a renewal of her certificate of incorporation b. forever c. for 50 years, after which time the certificate of incorporation must be renewed d. until one of her partners dies e. until the state determines that the corporation no longer serves the function for which it was incorporated

b

4. A commercial instrument where one party has a legal obligation to pay another party a certain sum of money and involves a maker and a payee only is called: a. a check b. a note c. a debit d. a draft e. a certificate of deposit

b

6. The draft that requires immediate payment by the drawee to the payee, which is true of a check, is called: a. a trade acceptance draft b. a sight draft c. a time draft d. an account receivable e. none of the other choices

b

1. Negotiable instruments are not: a. substitutes for cash b. credit devices c. subject to Article 2 of the UCC d. devices for making business deals easier e. all of the other choices

c

11. In order to establish a superior right, a creditor must: a. prohibit a default b. insure the debt instrument c. perfect the security interest d. keep the existence of the security interest a secret e. do none of these things

c

22. Refer to Fact Pattern 13-1. Jeanette plans on having a receptionist and a secretary, but no other managerial workers. For simplicity, Richard would probably suggest that Jeanette operate as a: a. limited partnership b. general partnership c. sole proprietorship d. corporation e. cooperative

c

24. The most common form of business organization is: a. joint venture b. partnership c. proprietorship d. corporation e. none of the other choices

c

16. In some cases, the property of a debtor will not be available to a creditor who wishes to attach and sell it to satisfy an outstanding debt. Exempt property often includes: a. the family house b. the family jewelry c. some tools used in the debtor's trade d. the family house and some tools used in trade e. the family house, jewelry, and some tools used in trade

d

19. The primary objective of the trustee is: a. to deplete the debtor's estate b. to protect general creditors first c. to ensure that the debtor's exempt property is liquidated d. to maximize the amount of the debtor's assets available for distribution to creditors e. to maximize the amount of the debtor's assets that the trustee is paid

d

Jeanette finished her M.B.A. at the University of Florida. Before returning to school for the degree, she was a Certified Public Accountant with an accounting firm in Miami. She is now thinking of starting a consulting firm to advise corporate clients of the best ways to establish and maintain their financial records. Jeanette contacts her lawyer, Richard, for advice about whether she should go into business for herself, and, if she does, how to go about setting up a consulting firm. Richard discusses the various options and explains their good and bad points. 21. Refer to Fact Pattern 13-1. If Jeanette decides to go into business with her friend Maia, Richard suggests that the two establish a partnership to carry on their business. If they do, this means both a. are co-owners of the business b. share control over the profits of the business c. have limited liability for the debts of the business d. are co-owners of the business and share control over the profits of the business e. are co-owners of the business and share control over the profits of the business and have limited liability for the debts of the business

d

12. When a business lends another business money, it should perfect its security interest by: a. applying to the IRS for security b. publish a notice in the Federal Register c. preparing its inventory for satisfaction d. obtaining a late-term guarantor e. none of the other choices

e

15. 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 the bank: a. collects nothing from the banks because it failed to attach its interest b. collect the unpaid balance of the loan from the timber companies, depending on how much secured timber they bought from Bean c. collect the unpaid balance of the loan from the timber companies, which are each jointly and severally responsible under UCC 4-320, which sets strict standards for security interests d. collect the unpaid balance of the loan from the timber companies only if it can show that the companies had been notified by the bank each time they accepted timber from Bean e. none of the other choices

e

18. When a debtor petitions the court for Chapter 7 bankruptcy, which item(s) must be provided? a. lists of all creditors with amounts owed them b. a list of all property owned by the debtor c. a statement of the financial affairs of the debtor d. a statement of the debtor's current income and expenses e. all of the other choices

e

2. Under Article 3 of the UCC, a check is: a. an unconditional written order to pay that involves three parties: a drawer, drawee, payee; the drawee may be a bank, person, or business. Payment may be set at some future time b. an unconditional written order to pay that involves two parties: drawer and payee; the payment is at an agreed upon future date c. a promise by one party to pay a certain sum of money to another party; two parties are involved: the maker and the payee; payment may be set at some future date d. an acknowledgment by a bank that it has received money from a customer with a promise from the bank that it will repay the money received either at a specified date or upon demand; two parties are involved: a maker and a payee e. none of these

e

20. The primary objective of the trustee is: a. to deplete the debtor's estate b. to protect general creditors first c. to ensure that the debtor's exempt property is liquidated d. to maximize the amount of the debtor's assets that the trustee is paid e. none of the other choices

e

25. In a sole proprietorship, the owner is: a. the business b. a corporation c. a subsidiary d. a partnership e. none of the other choices

e

5. When a note is to be paid in regular payments but also includes a final payment more than double the regular payments, the note is called: a. an installment note b. a collateral note c. a payee note d. a maker note e. a balloon note

e

8. TP sells franchises in the Old Fast Food chain. TP sells a franchise to Choi for $100,000 by cashier's check. Choi then hears that TP is going out of business and tries to stop payment on the check. TP has already transferred the money to a third party who meets the UCC's requirements for a holder in due course. The bank paid that third party. TP declares it is out of business. In a subsequent lawsuit: a. the court will find that the third party liable as surety b. because of the fraud involved, the court will require the third party repay Choi c. because the instrument involved was a cashier's check and not an ordinary check, the court will not require the third party to repay Choi d. because the amount in controversy was more than $50,000, the courts will be empowered to view the fraud as a felony and will ignore the requirements of the UCC e. none of the other choices

e

9. An open account means: a. multiple payments are made on a regular schedule b. minimum monthly payments are made on an account balance c. half payment is due when the invoice is received d. the borrower may borrow up to the full amount of the credit limit e. none of the other choices

e