Ask Question
BusinessBusiness
16 July, 04:12

Burns borrowed $240,000 from Dollar Bank as additional working capital for his business. Dollar required that the loan be collateralized to the extent of 20% and that an acceptable surety for the entire amount be obtained. Surety Co. agreed to act as surety on the loan, and Burns pledged $48,000 of negotiable bearer bonds. Burns defaulted. Which of the following statements is true?

A. Dollar must first liquidate the collateral before it can proceed against Surety.

B. Surety is liable in full immediately upon default by Burns but will be entitled to the collateral upon satisfaction of the debt.

C. Dollar must first proceed against Burns and obtain a judgment before it can proceed against the collateral.

D. Surety may proceed against Burns for the full amount of the loan even if Surety settles with Dollar for a lower amount.

+4
Answers (2)
  1. 16 July, 04:37
    0
    Answer is B. Surety is liable in full immediately upon default by Burns but will be entitled to the collateral upon satisfaction of the debt.

    Explanation:

    Burns borrowed $240,000 from Dollar Bank as additional working capital for his business. Dollar required that the loan be collateralized to the extent of 20% and that an acceptable surety for the entire amount be obtained. Surety Co. agreed to act as surety on the loan, and Burns pledged $48,000 of negotiable bearer bonds. Burns defaulted. The following statement is true:

    Surety is liable in full immediately upon default by Burns but will be entitled to the collateral upon satisfaction of the debt.
  2. 16 July, 04:38
    0
    B - Surety is liable in full immediately upon default by Burns but will be entitled to the collateral upon satisfaction of the debt.

    Explanation:

    A surety comes to play when a party lacks certainty about whether or not another party in a contract will be able to fulfill all stated requirements. The other party could be required to provide a guarantor, who will be involved in the contract of suretyship. The essence of this is to reduce possible risks for the lending party.

    This surety bond involving 3 parties, allows the lending party, file a claim against the bond to recover losses incurred, if the borrower fails to adhere to the terms previously stated.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Burns borrowed $240,000 from Dollar Bank as additional working capital for his business. Dollar required that the loan be collateralized to ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
Dionne has been very careful to work with her team to finalize next year's goals. She has taken the process seriously and now wants to make sure that others do their part. She is insisting that all employees follow instructions fully and completely.
Answers (1)
On September 1, 2021, Daylight Donuts signed a $188,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2022.
Answers (1)
The first step in creating a cash flow statement is which of the following? Recording financial goals Recording expenses Recording income Recording tax information
Answers (1)
An owner of real estate was declared legally incompetent and was committed to a state mental institution. While institutionalized, the owner wrote and executed a will. The owner later died and was survived by a spouse and three children.
Answers (1)
The stock exchange is based upon the economic laws of what two things
Answers (1)
New Questions in Business
The following information was taken from the financial statements of Hofburg Corp. for the year just ended: Accounts receivable, January 1 $ 21,600 Accounts receivable, December 31 30,400 Sales on account and cash sales 438,000 Uncollectible
Answers (1)
China has a collectivist culture. how do you believe that this will affect managers in a starbucks store?
Answers (1)
XYZ title, in preparing a title commitment for a transaction set to close on July 1, 2009, comes across a deed from July 1, 1988 that is improperly acknowledged. What notation should they put on the title commitment?
Answers (1)
When a firm in perfect competition has economic profit is equal to zero?
Answers (1)
Workers who receive benefits are often less motivated. True or false.
Answers (1)
Home » Business » Burns borrowed $240,000 from Dollar Bank as additional working capital for his business. Dollar required that the loan be collateralized to the extent of 20% and that an acceptable surety for the entire amount be obtained. Surety Co.
Sign Up Forgot Password?