Distinguish between two-party and three-party secured transactions, and provide some examples
What will be an ideal response?
Two-party secure transactions occur, for example, when a seller sells goods to a buyer on credit and retains a security interest in the goods.
Students' examples may vary.
Example: A farmer purchases equipment on credit from a farm equipment dealer. The dealer retains a security interest in the farm equipment that becomes collateral for the loan. This is a two-party secured transaction. The farmer is the buyer-debtor and the farm equipment dealer is the seller-lender-secured creditor.
A three-party secured transaction arises when a seller sells goods to a buyer who has obtained financing from a third-party lender (e.g., bank) and the third-party lender takes a security interest in the goods.
Example: A business purchases an airplane from an airplane manufacturer. The business obtains a loan to purchase the airplane from a bank, which obtains a security interest in the airplane. The airplane manufacturer is paid for the airplane out of the proceeds of the loan. This is a three-party secured transaction. The airplane manufacturer is the seller, the purchasing business is the buyer-debtor, and the bank is the lender-secured creditor.
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Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent:
Direct materials $8,400 Direct labor 11,250 Variable overhead 12,600 Fixed overhead 16,200 An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit. If Clemente could avoid $3,000 of fixed overhead by accepting the offer, net income would increase (decrease) by a) $(3,150). b) $6,750. c) $750. d) $(5,850).
What does the law of demand imply?
a. When price falls, quantity supplied falls also. b. When price rises, quantity demanded falls. c. When price rises, quantity demanded rises also. d. When price falls, quantity supplied rises.