Errol Contracts with XYZ Construction to Build His Company,OP Finance,a

question 71

Multiple Choice

Errol contracts with XYZ Construction to build his company,OP Finance,a new high-rise office building.The building will cost $3 million.OP Finance has a very high accounts receivable balance.In order to pay XYZ,Errol arranges a loan from CIBC.Which of the following is the most desirable for CIBC?

• A)Take a conditional sale of the building,retaining ownership until OP pays the loan
• B)Take assignment of accounts receivable
• C)Take a general security agreement
• D)Take a security interest in the building
• E)Use a floating charge

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Definitions:

Direct Materials

Materials in their unprocessed or natural state that can be directly linked and assigned to the end product during the production phase.

Work in Process

Inventory that is in the production process and has not yet been completed or turned into final goods.

Labeling Department

A section within a manufacturing process dedicated to attaching labels to products, outlining product information or branding.

Production Activity

The series of operations involved in the manufacturing of goods and products.