Your company has just purchased a large piece of property, and multiple creditors have a security interest in the property. This security interest must then be perfected, which sets forth the rights of a secured creditor against other creditors who also have a security interest in your property.
In an Excel spreadsheet that is 2 pages in length, create 2 charts (1 chart on each page).
The guidelines for the first chart are the following:
- Create a list of the priority of creditors with regard to security interests when there are conflicting claims.
- Which creditor is given preference, and why?
- Discuss the creditors that follow in the chain.
The guidelines for the second chart are the following:
- Depict a scenario with 4 different creditors that have a security interest in the property of a company.
- Be sure to list next to each creditor the date of perfection if the security interest is perfected.
- List, in order, the creditors. Create a column in which you explain why that creditor is in that place in the chain of priority.
- How will the lien on the property be shown in the notes to the financial statements?