Question 1

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 2

Fact Pattern 17-1 
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 17-1.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

According to the Uniform Commercial Code (UCC) § 4-403, the bank must stop payment on a check if it is requested within a reasonable time and the order is given in a way that would allow the bank to act on it before the payment is made. Since Echo gave a valid order and Capital had a reasonable time to act, they must stop payment on the check. However, Capital is not automatically liable to Fix-It for the amount of the check, and Echo does not need a valid reason to act. The certification of the check is also not relevant in this situation.

Question 3

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...

Question 4

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 5

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 6

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 by setting aside sufficient funds to cover the amount, it becomes a certified check. This means that the bank guarantees the funds and will honor the check when it is presented for payment. Therefore, the answer is B) certified.

Question 7

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 8

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

The check is considered stale because it has been presented for payment more than six months after the date it was originally written.

Question 9

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, with Quik Mart depositing its receipts (assets) into the bank account (liability owed to Quik Mart by the bank).

Question 10

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 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

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 has written a check for more money than is available in her account, resulting in a negative balance.

Question 13

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 one who issued the check and is responsible for its payment. Mira, as the recipient of the check, can hold Kip liable in a civil suit for the amount of the check that was dishonored by the bank. The bank may also be liable for any fees or damages caused by the dishonored check, but their liability is separate from Kip's.

Question 14

Jen signs a check "pay to the order of Kev" drawn on Jen's account in Little Bank to buy Kev's car.Jen asks Little Bank to indicate on the face of the check that it will accept it when Kev 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

Based on the given scenario, the best choice is a certified check. A certified check is a personal check that has been guaranteed by the bank that it will be paid when presented for payment. By requesting Little Bank to indicate on the face of the check that it will accept it when Kev presents it for payment, Jen is asking for the check to be certified. Therefore, the bank's guarantee makes it a certified check.

Question 15

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

The answer of John writes a check to Kay as...

Question 16

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

Unity Bank can recover from Steve because he committed fraud by forging Tricia's signature. Steve can be held criminally responsible for his actions, and Unity Bank can also pursue civil action against him to recover the funds. However, Tricia cannot recover from Steve because he may not have the means to reimburse her.

Question 17

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 knowingly writing a check without sufficient funds is considered a form of deception and can lead to financial harm for the recipient. Forgery, negligence, and robbery do not apply in this scenario.

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

The forgery of Caleb's signature on the check is not effective, as it is a criminal act and violates banking laws. Even if Downtown Bank debits Caleb's account, he can dispute the transaction and deny any authorization. The bank will be liable for reimbursing him for the amount stolen.

Question 19

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 20

Fact Pattern 17-1 
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 17-1.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 because it paid the check despite the stop-payment order, which means the payment was not properly authorized.

Quiz 17: Checks and Banking in the Digital Age

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

Fact Pattern 17-1 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 17-1.Capital Bank

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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