Chapter 20 Title, Risk, and Insurable Interest. All Answers

N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows. N A question new to this edition of the Test Bank. + A question modified from the previous edition of the Test Bank. = A question inc ...

N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows. N A question new to this edition of the Test Bank. + A question modified from the previous edition of the Test Bank. = A question included in the previous edition of the Test Bank. A1. The UCC has replaced the common law concept of title in part with the concept of risk of loss. T PAGE: 384 TYPE: N NAT: AACSB Analytic AICPA Legal A2. If a sale involves crops that are to be harvested within twelve months, iden-tification takes place when the crops are planted. T PAGE: 384 TYPE: + NAT: AACSB Reflective AICPA Legal A3. If a sale involves unborn animals to be born within twelve months after contracting, identification takes place when the animals are born. F PAGE: 384 TYPE: + NAT: AACSB Reflective AICPA Legal A4. Fungible goods are goods that can be delivered only by transport. F PAGE: 385 TYPE: = NAT: AACSB Analytic AICPA Legal A5. If an owner holds fungible goods as a tenant in common, he or she cannot pass title to the goods without the other owners’ acquiescence. F PAGE: 385 TYPE: = NAT: AACSB Reflective AICPA Legal A6. A receipt issued by a warehouser for goods stored in a warehouse is a bill of lading. F PAGE: 386 TYPE: = NAT: AACSB Analytic AICPA Legal A7. A seller with voidable title can transfer good title to a good faith purchaser for value. T PAGE: 386 TYPE: = NAT: AACSB Analytic AICPA Legal A8. A lessee acquires whatever title the lessor has to the goods. F PAGE: 386 TYPE: N NAT: AACSB Analytic AICPA Legal A9. Under a shipment contract, the risk of loss passes to the buyer when the goods are delivered to the carrier. T PAGE: 390 TYPE: = NAT: AACSB Analytic AICPA Legal A10. Under the UCC, the risk of los necessarily passes with title. F PAGE: 390 TYPE: N NAT: AACSB Analytic AICPA Legal A11. When a seller keeps the goods for pickup, if the seller is a merchant, the risk of loss passes to a buyer on tender of delivery. F PAGE: 392 TYPE: N NAT: AACSB Analytic AICPA Legal A12. If a lessor is a merchant, the risk of loss passes to a lessee on the lessee’s receipt of the goods. T PAGE: 392 TYPE: + NAT: AACSB Analytic AICPA Legal A13. In a sale on approval, a buyer takes goods primarily for resale, with a right to return any goods that fail to sell. F PAGE: 393 TYPE: = NAT: AACSB Analytic AICPA Legal A14. In a sale or return, title and risk of loss remain with the seller until the buyer ac¬cepts the goods. F PAGE: 393 TYPE: N NAT: AACSB Analytic AICPA Legal A15. A consignment is treated as a sale or return and governed by Article 2. F PAGE: 394 TYPE: N NAT: AACSB Analytic AICPA Legal A16. When a buyer breaches a contract, the risk of loss immediately shifts to the buyer. T PAGE: 396 TYPE: = NAT: AACSB Analytic AICPA Legal A17. If a buyer accepts a shipment of goods and later discovers a defect, acceptance can be revoked. T PAGE: 396 TYPE: N NAT: AACSB Reflective AICPA Legal A18. If the tender or delivery of goods is so nonconforming that the lessee has the right to reject them, the risk of loss remains with the lessor until cure or acceptance. T PAGE: 396 TYPE: N NAT: AACSB Analytic AICPA Legal A19. Both the buyer and the seller can have an insurable interest in iden¬tical goods at the same time. T PAGE: 397 TYPE: + NAT: AACSB Analytic AICPA Legal A20. A seller has an insurable interest in goods as long as the goods are in existence. F PAGE: 397 TYPE: N NAT: AACSB Analytic AICPA Legal MULTIPLE CHOICE QUESTIONS A1. Leasing Equipment Corporation (LEC) agrees to lease five computer workstations to Mapmakers, Inc. Before any inter¬est in the workstations can pass from LEC to Mapmakers, they must be a. in existence and identified as the goods in the contract. b. in LEC’s physical possession. c. in Mapmakers’s physical possession. d. listed in a document of title and filed in the appropriate state office. A PAGE: 384 TYPE: + NAT: AACSB Reflective AICPA Legal A2. Wild Alaskan sockeye salmon that fill the hold of Dexter’s fishing boat are fungible if the fish are a. alike naturally, by agreement, or by trade usage. b. fundamentally different. c. fun, good, and edible. d. rotting due to a broken freezer in the hold. A PAGE: 385 TYPE: + NAT: AACSB Reflective AICPA Legal A3. Laraby, a representative for Merchandise Shipping Company, delivers a bill of lading to Caitlin, the owner of Dockside Warehouse. A bill of lading is a. an invoice for payment for loading and carting verified by a seller. b. an order to ship goods signed by a buyer. c. a receipt for goods signed by a carrier. d. a receipt issued by a warehouser for goods in a warehouse. C PAGE: 386 TYPE: + NAT: AACSB Reflective AICPA Legal A4. Suki leaves a Update-brand watch at Timepiece Sales & Repair to be fixed. Timepiece sells the watch to Vera, who does not know that the watch belongs to Suki. Suki can recover from a. no one. b. Timepiece. c. Vera. d. Update. B PAGE: 387 TYPE: N NAT: AACSB Reflective AICPA Legal A5. Uri sells 100 cases of vitamins to Wanda, but before she takes physical possession, the cases are lost. Under the UCC, the parties’ rights and obligations with respect to the loss depend on the concept of a. identification. b. insurable interest. c. risk of loss. d. title. C PAGE: 389 TYPE: + NAT: AACSB Reflective AICPA Legal A6. Catchy Gadgets Corporation and Discount Outlets, Inc., enter into a contract for a sale of kitchenware. The contract requires Catchy to deliver the goods to Rapido Carrier Company for transport to Discount’s warehouse. Risk of loss passes to Discount when a. Catchy delivers the goods to Rapido. b. Catchy and Discount enter into their contract. c. Rapido transports the goods to Discount’s warehouse. d. Discount sells the goods to its customers. A PAGE: 390 TYPE: + NAT: AACSB Reflective AICPA Legal A7. Harley’s Home Store buys furniture from Relax-a-by Furniture, Inc. The parties agree that the furniture will be shipped “F.O.B. Relax-a-by’s ware-house” to Harley’s via Jiffy Shipping Corporation. The furniture is lost in transit. The loss is suffered by a. Jiffy Shipping. b. Relax-a-by Furniture. c. Harley’s Home Store. d. F.O.B. C PAGE: 390 TYPE: + NAT: AACSB Reflective AICPA Legal A8. Matrix Material Corporation in New Jersey sells fifty tons of fabric to Natural Fit Clothing, Inc., in Ohio, “F.O.B. New Jersey.” Matrix arranges with Outbound Truckline to transport the goods. The cost of the transport will be paid by a. Matrix. b. Natural Fit. c. New Jersey. d. Outbound. A PAGE: 390 TYPE: + NAT: AACSB Reflective AICPA Legal A9. Mitchell buys 100 bales of hay from New Grain Fields. The parties agree that the hay will be transported “F.O.B. New Grain Fields” via Farm County Trucking Company. Farm County’s truck and the hay are lost in a fire following an accident. The loss is suffered by a. Mitchell. b. New Grain Fields. c. Farm County Trucking. d. all of the parties as tenants in common in equal measure. A PAGE: 390 TYPE: + NAT: AACSB Reflective AICPA Legal A10. Delicioso Tea Company and Savory Stores, Inc., enter into a contract for a sale of organic tea. The contract includes the term “F.O.B. River City,” which is Savory’s location. This means that the contract is a. a bill of lading. b. a destination contract. c. a shipment contract. d. a warehouse receipt. B PAGE: 392 TYPE: + NAT: AACSB Reflective AICPA Legal A11. Finished Furnishings, Inc., agrees to lease an Oak Top-brand desk to Research Resources, Inc. (RRI), which agrees to pick it up at Streetside Warehouse. Before RRI retrieves the desk, it is stolen. The loss is suf¬fered by a. Perfect Furnishings. b. Oak Top. c. Streetside Warehouse. d. RRI. D PAGE: 392 TYPE: + NAT: AACSB Reflective AICPA Legal A12. Twyla buys a Voracious-brand bicycle from U-Pik-It Bike Store, which agrees to keep the bike for Twyla until she picks it up. Before Twyla gets the bike, a fire destroys the store and the bike. The loss of the bike is suffered by a. no one. b. Voracious. c. Twyla. d. U-Pik-It. D PAGE: 392 TYPE: + NAT: AACSB Reflective AICPA Legal A13. Marine Recreation, Inc., allows Nels to take a Marine Recreation boat for a “test run.” Nels tries the boat for a few hours, returns, and buys it. This is a. a bailment. b. a consignment. c. a sale on approval. d. a sale or return. C PAGE: 393 TYPE: = NAT: AACSB Reflective AICPA Legal A14. Dragonaire Corporation contracts with Excel Trucking Company to take goods to Fly-By Airlines, Inc., with Fly-By to transport the goods to a Geo Storage Company warehouse. Excel, Fly-By, and Geo each acknowl¬edge possession of the goods by a document of title. Excel, Fly-By, and Geo are a. bailees. b. consignees. c. lessees. d. sellers. A PAGE: 393 TYPE: = NAT: AACSB Reflective AICPA Legal A15. Crest Jewelers buys diamonds from Paramount Gems to resell with the right to return the unsold stones in lieu of payment. This is a. a bailment. b. a consignment. c. a sale on approval. d. a sale or return. D PAGE: 394 TYPE: = NAT: AACSB Reflective AICPA Legal A16. Open Road Showroom sells new and used motorcycles. Some of the motorcycles are held on consignment, including six consigned by Pedro Cycles, Inc. Like most consignments, Open Road’s deal with Pedro Cycles is a. a bailment. b. a sale. c. a delivery ex-ship. d. a lease. A PAGE: 394 TYPE: N NAT: AACSB Reflective AICPA Legal A17. Town Style Stores orders Hidebound-brand leather jackets from Cowhide & Cotton Company (CCC). CCC mistakenly ships denim jackets, which Town re¬jects and returns via Valu Transport, Inc. During the return, the jack¬ets are lost. The loss is suffered by a. Town. b. Hidebound. c. Valu. d. CCC. D PAGE: 396 TYPE: + NAT: AACSB Reflective AICPA Legal A18. NuStores accepts a shipment of QuikView-brand 3D HD DVD players from Open-Ur-Eyes, Inc. NuStores later discovers a defect in the players, revokes acceptance, and returns the players via Playback, Inc. During the return, the play¬ers are lost. The loss is suffered by a. NuStores. b. Playback. c. QuikView. d. Open-Ur-Eyes. D PAGE: 396 TYPE: + NAT: AACSB Reflective AICPA Legal A19. Essen Corporation buys from Fallow Farms, Inc., a rice crop that Fallow plans to plant and harvest during the next growing season. Essen plans to sell the rice to Gourmet Grocery Stores. After the rice is planted, but before it is harvested, an insurable interest in the rice ex¬ists in a. Essen and Fallow, but not Gourmet Grocery. b. Essen, Fallow, and Gourmet Grocery. c. Essen only. d. Fallow only. A PAGE: 397 TYPE: = NAT: AACSB Reflective AICPA Legal A20. Pie Sales Corporation orders ReadyMade-brand pies from Savory Foods Company. Savory identifies the goods. Before they are shipped to Pie Sales, an insurable interest in the goods exists in a. Pie Sales and Savory Foods. b. ReadyMade and Savory Foods. c. Pie Sales and ReadyMade. d. all of the parties as tenants in common. A PAGE: 397 TYPE: + NAT: AACSB Reflective AICPA Legal A1. In the following situations, two parties claim the same goods. Who is most likely to prevail in each circumstance? Explain. (a) Olan steals Phil’s television set and sells it to Quincy, an innocent purchaser, for value. Phil learns Quincy has the set and demands its return. (b) Riley takes his television set for repair to Silky, a merchant who sells new and used television sets. By accident, one of Silky’s employees sells the set to Tuna, an innocent purchaser-customer, who takes possession. Riley wants his set back from Tuna. A2. Quality Computer Company agrees to sell one hundred hard drives to Retail Electronics, Inc. The hard drives, which Retail Electronics ex¬pressly requires to have certain amounts of memory, are to be shipped “F.O.B. Retail Electronics distribution center in Memphis, TN.” When the drives arrive, Retail Electronics rejects them and informs Quality Computer, claiming that the drives do not conform to Retail Electronics’ memory re¬quirement. A few hours later, the drives are destroyed in a fire at Retail Electronics’ distribution center. Will Quality Computer succeed in a suit against Retail Electronics for the cost of the goods?