Ajax Corporation borrowed $50,000 from National Bank,giving National a security interest in its factory equipment.The agreement stated that the equipment would be security for this $50,000 loan and any future loans that National made to Ajax.National filed a valid financing statement.Over the next several months,Ajax borrowed another $100,000 from National.No additional financing statements were filed.Ajax has not made any payments on its loans from National.Ajax defaults on these loans.National wants to foreclose on the collateral.Assuming this security agreement is valid and perfected,how much of National's debt is secured?

Question

Quizplus · Accepted Answer

A security interest in the factory equipment was created to secure the initial $50,000 loan, and the security agreement contained a future advances clause. As long as the security interest is valid and perfected, National Bank has a claim to the entire amount of the $150,000 loan, including the original $50,000 and the additional $100,000 advanced to Ajax. No additional financing statements were required to perfect the security interest in the $100,000 advance since the security agreement contained a valid future advances clause. Therefore, the entire $150,000 is secured.

Ajax Corporation Borrowed $50,000 from National Bank,giving National a Security