Landscaping Company Phyllrox Co

question 45

Multiple Choice

Landscaping company Phyllrox Co. purchased a forklift from Brown's Equipment Co. Phyllrox made a down payment in cash and signed a promissory note for $7,500. For $7,200 Brown's sold the note to Corporate Bank, who took it in good faith without notice of any problems with it. After Phyllrox used the forklift for two weeks, it broke down and could not be repaired. Phyllrox refuses to make any more payments to Corporate Bank. In this case:

• A) Phyllrox can assert the failure of the forklift as a defense to making payments to Corporate Bank.
• B) Corporate Bank is a holder in due course.
• C) Both of these are correct.
• D) Neither answer is correct.

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Definitions:

Common Stock

Equity ownership in a corporation, providing voting rights and a share in the company's profits through dividends.

Stock Split

A corporate action that increases the number of a company’s outstanding shares by dividing each share, which in turn reduces the price per share.

Par Value

The face value of a bond or the stock value stated in the corporate charter, which is the legal capital per share.

Market Value

The current quoted price at which an asset or service can be bought or sold in an open market.