Question 1

Dhani signs a check "pay to the order of Eton" drawn on Dhani's account in Fidelity Guaranty Bank and dates the check "May 1." Eton presents the check to the bank for payment the following December 15. This is
A) an oversight .
B) an overdraft.
C) a certified check.
D) a stale check.

Accepted Answer

A stale check is a check that is presented for payment after a certain period of time, typically six months. In this scenario, Eton presents the check to the bank for payment seven months after it was dated, making it a stale check.

Question 2

Chad writes Dinah an uncertified check for $500 drawn on Chad's account at Employees Credit Union. Seven months later, Dinah presents the check for payment. The credit union pays the check in good faith without consulting Chad. The credit union
A) cannot charge Chad's account for any amount.
B) can charge Chad's account for $250 only.
C) can charge Chad's account for $500.
D) is liable for breach of contract.

Accepted Answer

The credit union can charge Chad's account for $500 because the check was presented within a reasonable time frame, and the credit union acted in good faith by paying it.

Question 3

Elmore pays First National Bank $1,000 plus a service fee to draw a check on itself made payable to Go Delivery Service. This is
A) a cashier's check.
B) an overdraft.
C) a stale check.
D) a stop-payment order.

Accepted Answer

Elmore is paying First National Bank to draw a check on itself, which is a cashier's check. An overdraft occurs when there are insufficient funds to cover a check, a stale check is one that is too old to be cashed, and a stop-payment order is a request from the account holder to the bank not to honor a specific check.

Question 4

Fact Pattern 24-1 Ruth takes her car to Service Center, which repairs the car and bills her for $500. She writes out a check drawn on Tempo Bank, but later, believing that Service Center did not fix the car properly, issues a stop-payment order.
Refer to Fact Pattern 24-1. Tempo
A) is liable to Service Center for the amount of the check.
B) must stop payment if the bank has a reasonable time to act.
C) need not follow Ruth's order because it was issued after the check.
D) need not follow Ruth's order unless the check was certified.

Accepted Answer

Tempo must stop payment if the bank has a reasonable time to act, as per standard banking procedures for stop-payment orders.

Question 5

Brandy forges Caleb's signature on a check "payable to the order of Brandy" drawn on Caleb's account in Downtown Bank. Caleb's forged signature is
A) effective if an innocent third party accepts the check.
B) effective to the degree that it matches Caleb's genuine signature.
C) effective to the extent that Downtown Bank debits Caleb's account.
D) has no legal effect .

Accepted Answer

A forged signature is generally considered invalid and has no legal effect, meaning it does not authorize any transaction or obligation.

Question 6

Gary writes a check drawn on Hillside Bank for $400 "payable to Ian" on May 1. Gary dies on May 3. Ian presents the check to the bank on May 5. Unaware of Gary's death, the bank
A) must certify the check.
B) may pay the check.
C) must consult with Gary's heirs before paying the check.
D) can do nothing until Ian claims an interest in the account.

Accepted Answer

The bank may pay the check because it was presented within 10 days of Gary's death, and the bank was unaware of his death.

Question 7

Marta has a checking account with Neighbors Bank. Marta signs a check "payable to Olive" drawn on Marta's account. Neighbors Bank is
A) the payor.
B) the drawee.
C) the drawer.
D) the payee.

Accepted Answer

Neighbors Bank is the drawee because it is the bank on which the check is drawn and is responsible for paying the amount specified on the check from Marta's account.

Question 8

Brendan signs a check "pay to the order of College Bookstore" drawn on his account in Delta Bank to pay for his current semester's textbooks. The bookstore deposits the check in its account in Eagle Bank. This check is
A) a substitute check.
B) a nonnegotiable instrument.
C) a type of draft.
D) not a substitute for cash.

Accepted Answer

A check is a type of draft, which is a written order by one party (the drawer) to another party (the drawee, typically a bank) to pay a certain sum to a third party (the payee).

Question 9

Ervin signs a check "pay to the order of Felicia" drawn on Ervin's account in Garden Fields Bank. Based on a valid legal ground, Ervin later orders the bank not to pay the check, but the bank pays it over Ervin's order. Subsequent checks written on Ervin's account "bounce." Most likely liable for the costs to Ervin is
A) any party to whom a subsequent check was written.
B) Ervin.
C) Felicia.
D) Garden Fields Bank.

Accepted Answer

Garden Fields Bank is most likely liable because it paid the check despite Ervin's valid order to stop payment. The bank's failure to honor the stop payment order makes it responsible for the resulting costs.

Question 10

Dana writes a check to Becky on Dana's account at Community Bank. The bank dishonors the check even though Dana has sufficient funds in her account. The bank is liable to
A) Dana.
B) Becky.
C) the payee on Dana's next check.
D) no one.

Accepted Answer

The answer of Dana writes a check to Becky on...

Question 11

Shane issues a check drawn on Thrifty Bank to Farm Supply Store to pay for a rototiller. Later, Shane discovers a defect in the device and orders Thrifty to stop payment on the check. Shane does not renew the order, and the bank clears the check eight months later. The bank
A) must recredit Shane's account.
B) must obtain funds from Farm Supply to cover the check.
C) must substitute acceptable goods.
D) need not recredit Shane's account.

Accepted Answer

Once a check has been cleared, the bank is not responsible for any disputes between the payer and the payee. Shane's order to stop payment on the check was not renewed. Therefore, the bank was justified in clearing the check, and they are not obligated to recredit Shane's account.

Question 12

Tomas writes a check for $1,000 drawn on United Bank and presents it to Viola. Viola presents the check for payment to United Bank, which dishonors it because of insufficient funds . The party most likely liable to Viola is
A) Tomas in a civil suit.
B) Tomas in a criminal prosecution.
C) United Bank in a civil suit.
D) United Bank in a criminal prosecution.

Accepted Answer

Tomas is liable to Viola in a civil suit because he issued a check without sufficient funds to cover it. The bank is not liable as it simply followed the account's status.

Question 13

Faye forges Greta's signature on a check "payable to the order of Faye" drawn on Greta's account in Hearthside Bank. Most likely, if the bank pays the check
A) the Federal Reserve will reimburse all parties for their costs.
B) the loss will be apportioned among all of the bank's customers.
C) Greta will be liable for the amount.
D) the bank will have to recredit Greta's account.

Accepted Answer

The answer of Faye forges Greta's signature on a check...

Question 14

Homer can write checks on his account at InterCity Bank. Jemma steals the checks, forges Homer's signature, and cashes the checks at InterCity. The bank is excused from any liability if, after receipt of the first forged check, Homer fails to report the forgeries within
A) one day.
B) thirty days .
C) one month.
D) six months.

Accepted Answer

The bank is excused from any liability if, after receipt of the first forged check, Homer fails to report the forgeries within thirty days.

Question 15

Dalton presents an uncertified check for payment more than six months after its date. The check was drawn by Emma on her account in First Bank. First bank may do all of the following except
A) cash the check.
B) consult Emma.
C) refuse to cash the check.
D) ask Dalton what he would prefer.

Accepted Answer

First Bank is not obligated to ask Dalton what he would prefer regarding the stale check. The bank can choose to cash it, consult the drawer (Emma), or refuse to cash it based on its policies.

Question 16

Fact Pattern 24-1 Ruth takes her car to Service Center, which repairs the car and bills her for $500. She writes out a check drawn on Tempo Bank, but later, believing that Service Center did not fix the car properly, issues a stop-payment order.
Refer to Fact Pattern 24-1. If Tempo pays the check, the bank
A) can sue Ruth for a wrongful stop-payment order.
B) can sue Service Center for breach of contract.
C) is liable to Service Center for the time and trouble to return the payment.
D) is liable for Ruth's loss due to the wrongful payment.

Accepted Answer

Tempo Bank is liable for Ruth's loss due to the wrongful payment because Ruth issued a stop-payment order, and the bank failed to honor it.

Question 17

Cleo writes a check for $100 drawn on Debit & Credit Bank and presents it to Elegant Jewelers for payment. If the check is not backed by sufficient funds and intent to defraud can be proved, Cleo may be prosecuted for
A) forgery.
B) writing a bad check .
C) negligence.
D) all of the choices.

Accepted Answer

Writing a bad check with intent to defraud is a criminal offense, and Cleo can be prosecuted for this specific act.

Question 18

Travis signs a check "pay to the order of Umberto" drawn on Travis's account in Valley Bank. Travis has $400 in his account but the amount of the check is $500, which the bank pays. This creates
A) a dishonored check.
B) an overdraft.
C) an oversight.
D) a stale check.

Accepted Answer

Travis's check created an overdraft, which means he withdrew more money than he had in his account. The bank paid the amount of the check anyway, but Travis will likely be charged an overdraft fee.

Question 19

Riley pays State Bank $500 plus a service fee to draw a check on itself payable to Torque Plumbing. The party responsible for paying the check is
A) only Riley.
B) both Riley and State Bank.
C) only State Bank.
D) only Torque Plumbing.

Accepted Answer

State Bank is responsible for paying the check as it is drawn on itself, making it the drawee. Riley is the drawer, and Torque Plumbing is the payee.

Question 20

Gillis writes a check to Harley as payment for a video game but soon discovers it is broken. He goes to the drawee bank and orally authorizes Ilene, a bank officer, to stop payment on the check. This order is valid for
A) fourteen days.
B) any stated period of time.
C) six days.
D) six months.

Accepted Answer

An oral stop payment order is valid for fourteen days unless confirmed in writing, which would then extend it to six months.

Quiz 24: Banking in the Digital Age

Dhani signs a check "pay to the order of Eton" drawn on Dhani's account in Fidelity Guaranty Bank and dates the check "May 1." Eton presents the check to the bank for payment the following December 15. This is

Chad writes Dinah an uncertified check for $500 drawn on Chad's account at Employees Credit Union. Seven months later, Dinah presents the check for payment. The credit union pays the check in good faith without consulting Chad. The credit union

Elmore pays First National Bank $1,000 plus a service fee to draw a check on itself made payable to Go Delivery Service. This is

Fact Pattern 24-1 Ruth takes her car to Service Center, which repairs the car and bills her for $500. She writes out a check drawn on Tempo Bank, but later, believing that Service Center did not fix the car properly, issues a stop-payment order. Refer to Fact Pattern 24-1. Tempo

Brandy forges Caleb's signature on a check "payable to the order of Brandy" drawn on Caleb's account in Downtown Bank. Caleb's forged signature is

Gary writes a check drawn on Hillside Bank for $400 "payable to Ian" on May 1. Gary dies on May 3. Ian presents the check to the bank on May 5. Unaware of Gary's death, the bank

Marta has a checking account with Neighbors Bank. Marta signs a check "payable to Olive" drawn on Marta's account. Neighbors Bank is

Brendan signs a check "pay to the order of College Bookstore" drawn on his account in Delta Bank to pay for his current semester's textbooks. The bookstore deposits the check in its account in Eagle Bank. This check is

Dana writes a check to Becky on Dana's account at Community Bank. The bank dishonors the check even though Dana has sufficient funds in her account. The bank is liable to

Shane issues a check drawn on Thrifty Bank to Farm Supply Store to pay for a rototiller. Later, Shane discovers a defect in the device and orders Thrifty to stop payment on the check. Shane does not renew the order, and the bank clears the check eight months later. The bank

Tomas writes a check for $1,000 drawn on United Bank and presents it to Viola. Viola presents the check for payment to United Bank, which dishonors it because of insufficient funds . The party most likely liable to Viola is

Faye forges Greta's signature on a check "payable to the order of Faye" drawn on Greta's account in Hearthside Bank. Most likely, if the bank pays the check

Homer can write checks on his account at InterCity Bank. Jemma steals the checks, forges Homer's signature, and cashes the checks at InterCity. The bank is excused from any liability if, after receipt of the first forged check, Homer fails to report the forgeries within

Dalton presents an uncertified check for payment more than six months after its date. The check was drawn by Emma on her account in First Bank. First bank may do all of the following except

Cleo writes a check for $100 drawn on Debit & Credit Bank and presents it to Elegant Jewelers for payment. If the check is not backed by sufficient funds and intent to defraud can be proved, Cleo may be prosecuted for

Travis signs a check "pay to the order of Umberto" drawn on Travis's account in Valley Bank. Travis has $400 in his account but the amount of the check is $500, which the bank pays. This creates

Riley pays State Bank $500 plus a service fee to draw a check on itself payable to Torque Plumbing. The party responsible for paying the check is

Gillis writes a check to Harley as payment for a video game but soon discovers it is broken. He goes to the drawee bank and orally authorizes Ilene, a bank officer, to stop payment on the check. This order is valid for