Question

2. Assuming that Smith took whatever steps were necessary to perfect his security interest in the combine no later than September 1, 2017 and that Edwards was current on her payments through July 1, 2018, suppose instead that, on July 24, 2018, Edwards sold the combine for $75,000 cash and deposited the cash in a bank account with a prior balance of $15,000. Suppose, further, that on July 30, 2018, Edwards purchased a tractor from Jones for $60,000, to use on Edwards’s “weekend farm” in Cherokee County. Edwards wrote Jones a check in the amount of $30,000, drawn on the aforementioned bank account, and agreed to pay Jones the balance due in installments of $1,000 per month for 36 months, giving Jones a security interest in the tractor to secure Edwards’s obligation to make the installment payments. Assume that Jones properly perfected her security interest in the tractor on July 31, 2018.

What is Smith’s collateral as of August 1, 2018?

Answer 1

Smith's collateral as of August 1,2018 will be $36,000

because Edwards purchased the tractor on $60,000 but he paid $30,000 and need to pay $1,000*36=$36,000.