When the Security Interest Is Perfected and the Buyer Knows

question 9

Multiple Choice

When the security interest is perfected and the buyer knows of its existence,a buyer in the ordinary course of business:

• A)is subject to the security interest created by his seller.
• B)takes free from a security interest created by his seller.
• C)takes free from a security interest only if the person is buying farm products from a person engaged in a farming operation.
• D)is not protected if the dealership is in default of its loan agreement.

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Definitions:

Cumulative Effect

The total impact of a change in accounting principle or correction of an error reported in a single period's financial statements.

Change In Accounting Principle

An adjustment made to the accounting methods used by a company, often requiring retrospective application to prior period financial statements.

Net Income

The remaining earnings of a firm once subtracting every expense and tax from its total income.

Extraordinary Item

Events or transactions that are distinct from the ordinary activities of a company, which are unusual in nature and infrequent in occurrence.