vasaline wrote: On June 15, Harper purchased equipment for $100,000 from Imperial Corp. for use in its manufacturing process. Harper paid for the equipment with funds borrowed from Eastern Bank. Harper gave Eastern a security agreement and financing statement covering Harper's existing and after-acquired equipment. On July 21, Harper was petitioned involutarily into bankrupt under Chapter & of the Federal Bankruptcy Code. A bankruptcy trustee was appointed. On June 23, Eastern filed the financing statement. Which parties will have a superior security interest in the equipment? Ans. D Eastern because it perfected its security interest within the permissible time limits. Wiley explains this by saying: When a purchase money security interest uses noninventory as collateral, it has priorty over prior competing interests as long as it perfected within twenty days. Now what I dont get is why is the creditor has a purchase money security interest. I thought he was considered a non-purchase money security interest since he took existing and after-acquired equipment as collateral. Please correct me because I think that Wiley is incorrect in this question.

I think it is confusing.  It should really say "Who has superior security interest in the equipment sold?"  I think you can only have PMSI in equipment sold to a customer, however you can have perfected secured interest in the rest of the equipment. 

Kitty, it says in the problem that the financing statement was filed within 20 days, which would make it perfected.  And what i was saying is that it cant be PMSI unless you have a direct interest in the actual equipment sold.  If you have interest in future acquired interest the best you can get is perfected security interest.  That is why adding "sold" to the end of the quesitons would make the softwares explanation correct. 

Vasaline, i agree with what you are saying i cant see how you can be a PMSI without taking interest in the exact collateral you sold.  You can have perfected secure interet, but not PMSI.