Question 1

Dora writes a check for $100 drawn on Eastern Bank and presents it to Fast Cash,Inc.,for payment.If the check is not backed by sufficient funds,Dora may be prosecuted for
A)forgery.
B)fraud.
C)negligence.
D)robbery.

Accepted Answer

Dora may be prosecuted for fraud if the check is not backed by sufficient funds. This is because presenting a check with insufficient funds is considered illegal and deceptive, constituting fraud.

Question 2

Kip writes a check for $1,000 drawn on Local Bank and presents it to Mira.Mira presents the check for payment to Local Bank,which dishonors it.The party most likely liable to Mira is
A)Kip in a civil suit.
B)Kip in a criminal prosecution.
C)Local Bank in an administrative proceeding.
D)neither Kip nor Local Bank.

Accepted Answer

Kip is the party responsible for paying the amount on the check to Mira, as the drawer of the check. Since the check was dishonored by Local Bank, Mira has the right to sue Kip in a civil court for the amount of the check.

Question 3

Clyde issues a check payable to Discount Mart.Elle,Discount's cashier,forges the store's indorsement and deposits the check in her bank account.Clyde's bank,First State Bank,pays the check.Clyde can recover from
A)Elle,but not First State Bank.
B)First State Bank,which cannot recover from Elle.
C)First State Bank,which can recover from Elle.
D)no one.

Accepted Answer

When Elle forged the indorsement, she committed a fraudulent act and is liable for the damages caused. However, since Clyde's bank, First State Bank, paid the check in good faith and without any reason to suspect fraud, they are protected under the Uniform Commercial Code (UCC) and are not liable. However, First State Bank can still recover the money from Elle, who committed the fraudulent act. Therefore, Clyde can recover from both Elle and possibly First State Bank through their right to subrogation, but only if First State Bank is able to recover the money from Elle.

Question 4

Simon signs a check "pay to the order of Tilly" drawn on Simon's account in United Bank.Vela forges Tilly's indorsement,First Federal Bank cashes the check,and Vela disappears.United pays First Federal and debits Simon's account.Most likely,the ultimate loss will fall on
A)Simon.
B)Trudy.
C)United Bank.
D)First Federal Bank.

Accepted Answer

The answer of Simon signs a check "pay to the...

Question 5

Thelma signs a check "pay to the order of Uri" drawn on Thelma's account in Verity Bank.Thelma has $400 in her account but the amount of the check is $500,which the bank pays.This is
A)a dishonored check.
B)an overdraft.
C)a postdated check.
D)a stale check.

Accepted Answer

This is an overdraft because Thelma's account does not have enough funds to cover the amount of the check. The bank paid the check, but Thelma will likely face fees and penalties for the overdraft.

Question 6

Fact Pattern 23-1 (Questions 15 and 16 apply)
Echo takes her car to Fix-It, Inc., which repairs the car and bills Echo for $500. Echo writes out a check drawn on Capital Bank, but later, believing that Fix-It did not repair the car properly, issues a stop-payment order.

-Refer to Fact Pattern 23-1.Capital Bank
A)is liable to Fix-It for the amount of the check.
B)must stop payment if Capital has a reasonable time to act.
C)need not stop payment unless Echo had a valid reason to act.
D)need not follow Echo's order unless the check was certified.

Accepted Answer

Capital Bank must stop payment if Echo's stop-payment order is received in time and the bank has a reasonable opportunity to act on it.

Question 7

Fact Pattern 23-1 (Questions 15 and 16 apply)
Echo takes her car to Fix-It, Inc., which repairs the car and bills Echo for $500. Echo writes out a check drawn on Capital Bank, but later, believing that Fix-It did not repair the car properly, issues a stop-payment order.

-Refer to Fact Pattern 23-1.Capital Bank pays the check.Capital
A)can sue Echo for a wrongful stop-payment order.
B)can sue Fix-It for breach of contract.
C)can sue no one because it paid a check that was not properly payable.
D)is liable for Echo's loss due to the wrongful payment.

Accepted Answer

Capital Bank is liable for Echo's loss due to the wrongful payment because it paid a check that was subject to a valid stop-payment order. Capital Bank did not follow Echo's instruction to stop payment, and therefore, Capital Bank breached its duty to its customer by wrongfully paying the check.

Question 8

Dan writes a check to Emma on his account at First State Bank.The bank dishonors the check even though Dan has sufficient funds in his account.The bank is
A)liable to Dan only.
B)liable to Dan and Emma.
C)liable to Emma only.
D)not liable to Dan or Emma.

Accepted Answer

The answer of Dan writes a check to Emma on...

Question 9

Elmer can write checks on his account at Finance Bank.Gina steals the checks,forges Elmer's signature,and cashes the checks at Finance.The bank is excused from any liability if,after receipt of the first forged check,Elmer fails to report the forgeries within
A)five business days.
B)fourteen consecutive days.
C)one year.
D)three years.

Accepted Answer

The answer of Elmer can write checks on his account...

Question 10

John writes a check to Kay as payment for a DVD player but soon discovers the player is broken.He goes to the drawee bank and orally authorizes Larry,a bank officer,to stop payment on the check.This order is valid for
A)fourteen days.
B)fourteen months.
C)thirty 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.

Question 11

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

Accepted Answer

National Bank is liable for the costs incurred by Liu due to their mistake of paying the check over Liu's order. As per the law, a bank is obligated to honor a check that is lawfully drawn, and any subsequent payments made by the bank are considered wrongful payments. Therefore, National Bank, and not Marv or any other party, is liable for the costs incurred by Liu due to the bounced checks.

Question 12

Elmo 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)a certified check.
C)a trade acceptance.
D)a traveler's check.

Accepted Answer

The answer of Elmo pays First National Bank $1,000 plus...

Question 13

Dhani signs a check "pay to the order of Etan" drawn on Dhani's account in First State Bank and dates the check "May 1." Etan presents the check to the bank for payment on December 15.This is
A)a dishonored check.
B)an overdraft.
C)a postdated check.
D)a stale check.

Accepted Answer

A check is considered stale after six months from the date it was written. Since Dhani's check was written on May 1 and Etan presented the check for payment on December 15, more than six months had passed, making it a stale check. The bank may choose to honor the check, but they are not obligated to do so.

Question 14

Jen signs a check "pay to the order of Key" drawn on Jen's account in Little Bank to buy Key's car.Jen asks Little Bank to indicate on the face of the check that it will accept it when Key presents it for payment.If the bank agrees,this will be
A)a cashier's check.
B)a certified check.
C)a trade acceptance.
D)a traveler's check.

Accepted Answer

If Little Bank agrees to indicate on the face of the check that it will accept it when Key presents it for payment, the check will become a certified check. A cashier's check is a check that is drawn on the bank's own funds, not the account of the person writing the check. A trade acceptance is a type of financial instrument used in business transactions, and a traveler's check is a type of check that can be used as a form of payment while traveling.

Question 15

Steve steals one of Tricia's checks and forges her signature.Tricia's bank,Unity Bank,pays the check.Tricia can recover from
A)Steve,but not Unity Bank.
B)Unity Bank,which cannot recover from Steve.
C)Unity Bank,which can recover from Steve.
D)no one.

Accepted Answer

Steve committed a crime by stealing and forging Tricia's signature, and therefore he is responsible for the financial loss that Unity Bank incurred. Since the bank paid the forged check, they can try to recover the funds from Steve through legal action. Unity Bank is not at fault since they were not aware of the forgery at the time of payment.

Question 16

Trudy forges Uma's signature on a check "payable to the order of Trudy" drawn on Uma's account in Verity 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 Verity's customers.
C)Uma will be liable for the amount.
D)Verity will have to recredit Uma's account.

Accepted Answer

The answer of Trudy forges Uma's signature on a check...

Question 17

Pat,the manager of Quik Mart,deposits the store's receipts in its account at Regional Bank.As to the receipts,the relationship between Quik Mart and the bank is
A)attorney and client.
B)creditor and debtor.
C)guardian and ward.
D)trustee and beneficiary.

Accepted Answer

The relationship between Quik Mart and the bank is that of a creditor and debtor, where Quik Mart is the creditor and the bank is the debtor. Quik Mart is depositing its receipts, which are its assets, into the bank's account, making the bank liable to pay Quik Mart the amount deposited whenever it demands. Therefore, the bank owes Quik Mart the amount deposited, and Quik Mart is the creditor who can demand repayment.

Question 18

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)not effective.

Accepted Answer

Forgery is illegal and any document or transaction involving a forged signature is not legally binding. Therefore, Brandy's forged signature on Caleb's check is not effective and cannot be used to withdraw funds from Caleb's account.

Question 19

First Community Bank agrees to accept a check by setting aside sufficient funds to cover the amount.This check is considered
A)cashed.
B)certified.
C)deposited.
D)provisionally credited.

Accepted Answer

When a bank agrees to accept a check and set aside sufficient funds to cover the amount, it is considered a certified check. This means that the bank guarantees that the check will be paid when presented for payment.

Question 20

Dru signs a check "pay to the order of Eppie" drawn on Dru's account in First Federal Bank.Greta forges Eppie's indorsement.First Federal pays the check.Most likely
A)Dru will be liable for the amount.
B)Eppie will have to pay Dru for the amount.
C)First Federal will have to recredit Dru's account.
D)the Federal Reserve will reimburse all parties for their costs.

Accepted Answer

The answer of Dru signs a check "pay to the...

Quiz 23: Checks and Banking in the Digital Age

Dora writes a check for $100 drawn on Eastern Bank and presents it to Fast Cash,Inc.,for payment.If the check is not backed by sufficient funds,Dora may be prosecuted for

Kip writes a check for $1,000 drawn on Local Bank and presents it to Mira.Mira presents the check for payment to Local Bank,which dishonors it.The party most likely liable to Mira is

Clyde issues a check payable to Discount Mart.Elle,Discount's cashier,forges the store's indorsement and deposits the check in her bank account.Clyde's bank,First State Bank,pays the check.Clyde can recover from

Simon signs a check "pay to the order of Tilly" drawn on Simon's account in United Bank.Vela forges Tilly's indorsement,First Federal Bank cashes the check,and Vela disappears.United pays First Federal and debits Simon's account.Most likely,the ultimate loss will fall on

Thelma signs a check "pay to the order of Uri" drawn on Thelma's account in Verity Bank.Thelma has $400 in her account but the amount of the check is $500,which the bank pays.This is

Dan writes a check to Emma on his account at First State Bank.The bank dishonors the check even though Dan has sufficient funds in his account.The bank is

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

John writes a check to Kay as payment for a DVD player but soon discovers the player is broken.He goes to the drawee bank and orally authorizes Larry,a bank officer,to stop payment on the check.This order is valid for

Liu signs a check "pay to the order of Marv" drawn on Liu's account in National Bank.Liu later orders National not to pay the check,but the bank pays it over Liu's order.Subsequent checks written on Liu's account "bounce." Most likely liable for the costs to Liu is

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

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

Jen signs a check "pay to the order of Key" drawn on Jen's account in Little Bank to buy Key's car.Jen asks Little Bank to indicate on the face of the check that it will accept it when Key presents it for payment.If the bank agrees,this will be

Steve steals one of Tricia's checks and forges her signature.Tricia's bank,Unity Bank,pays the check.Tricia can recover from

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

Pat,the manager of Quik Mart,deposits the store's receipts in its account at Regional Bank.As to the receipts,the relationship between Quik Mart and the bank is

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

First Community Bank agrees to accept a check by setting aside sufficient funds to cover the amount.This check is considered

Dru signs a check "pay to the order of Eppie" drawn on Dru's account in First Federal Bank.Greta forges Eppie's indorsement.First Federal pays the check.Most likely