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Q:
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.
Q:
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.
Q:
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.
Q:
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.
Q:
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.
Q:
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.
Q:
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.
Q:
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.
Q:
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.
Q:
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.
Q:
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.
Q:
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.
Q:
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.
Q:
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.
Q:
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.
Q:
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.
Q:
Rikki signs a check "pay to the order of Scholar University" drawn on Rikki's account in State Bank to pay her tuition. Rikki is
A.the certifier.
B.the drawee.
C.the drawer.
D.the payee.
Q:
Kris presents an instrument that states "pay to the order of Liv" to Metro Bank for payment. This is a special type of draft drawn on a bank, ordering the bank to pay a fixed amount of money on demand. This is
A.a certificate of deposit.
B.a check.
C.a debit card transaction receipt.
D.a trade acceptance.
Q:
Ian buys a cell phone in Jiffy Mart, using the means that accounts for more retail payments than any other. This means of payment is
A.a commercial check.
B.a debit card.
C.a personal check.
D.a trade acceptance.
Q:
Scott presents an instrument that states "pay to the order of Scott" to Town Bank for payment. This instrument is the most common type of negotiable instrument, which is
A.a certificate of deposit.
B.a check.
C.a note.
D.a trade acceptance.
Q:
Brendan signs a check "pay to the order of City 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. Like most checks, this check is
A.a one-party instrument.
B.a four-party instrument.
C.a three-party instrument.
D.a two-party instrument.
Q:
Currently, it is not clear which, if any, laws apply to the security of e-money payment information.
Q:
Stored-value cards are a form of digital cash.
Q:
Gaining unauthorized access to an electronic fund transfer system is a felony.
Q:
Unauthorized access to an electronic fund transfer system is a federal felony.
Q:
A customer has sixty days from the date of receipt of a statement of an electronic transfer to notify the financial institution of any errors.
Q:
If a customer's debit card is lost or stolen, the customer will not be liable for any unauthorized use of the card.
Q:
If a customer's debit card is lost or stolen and used without permission, the customer shall be required to pay no more than $50.
Q:
Financial institutions that exchange digital images of checks do not have to exchange the original paper checks.
Q:
The Federal Reserve System acts as a clearinghouse where banks exchange checks.
Q:
Each bank in a collection chain must pass a check on before midnight of the day of its receipt.
Q:
The first bank to receive a check for payment is the depositary bank.
Q:
The bank on which a check is drawn is the payor bank.
Q:
Generally, a cash deposit is not available for withdrawal until the next business day.
Q:
Generally, the funds represented by a deposited local check must be available for withdrawal the same business day.
Q:
A bank cannot recover from a holder who cashes a check bearing a forged indorsement once the bank has accepted and paid the item.
Q:
A bank that fails to detect an alteration to its customer's check is liable to the customer for the loss.
Q:
A customer must examine a bank statement and report any discovered forged signature to recover from the bank for the forgery.
Q:
A bank that pays a customer's check with a forged drawer's signature can generally pass the loss onto the customer.
Q:
A forged signature is effective as the signature of a drawer to the extent that is resembles the drawer's actual signature.
Q:
The death of a customer revokes a bank's authority to pay an item.
Q:
The incompetence of a customer revokes a bank's authority to pay an item.
Q:
An oral stop payment order is valid for thirty days.
Q:
A stale check is one that has been outstanding for longer than one month.
Q:
A written stop payment order is valid for fourteen days.
Q:
A bank is obligated to pay an uncertified check presented less than six months from its date.
Q:
A bank has no right to charge a customer's account for the amount of a stale check.
Q:
A drawer is not liable to the holder of a check if the check is not honored.
Q:
A check carries with it an implied promise to reimburse the bank for paying the check.
Q:
When a check "bounces," its holder can resubmit the check later, hoping that sufficient funds will be available.
Q:
Generally, a bank has no obligation to pay a customer's overdrafts.
Q:
A bank is subject to a civil suit if its customer writes a bad check.
Q:
A bank that has certified a check is under no obligation to accept it.
Q:
Certified checks are instruments that have been accepted for payment by the institutions on which they are drawn.
Q:
A check is a special type of certificate of deposit.
Q:
UCC Articles 3 and 4 govern checks.
Q:
Eppie gives a check to Fund Investments to buy 100 shares of stock in GR8 Tech Corporation for Eppie. The price of the shares is constantly fluctuating. Fund Investments asks Eppie to leave the amount of the check blank and allow it to fill in the price when making the purchase. Eppie agrees. Fund Investments buys the stock when the price is $4,000, but fills in the check for $5,000. The check is negotiated as payment for a $5,000 debt to Hasty Accounting Services, which takes the check in good faith and without notice of Fund Investments's act. Hasty later learns that Fund Investments was not authorized to fill in the check for $1,000 over the price. Is Hasty an HDC? If so, for how much?
Q:
Commercial Credit Company has in its possession an instrument dated May 1, 2009. The instrument is payable to the order of Alpha Company "on June 1, 2009," for $5,000. In the upper left corner is an address for Beta Corporation10 Corporate Park Avenue, Chicago, Illinoisand in the lower right corner is the signature of "Delta, Inc., By Eve, President." In the lower left corner is stamped "ACCEPTED: Beta Corporation by Frank, President, May 5, 2009." On the back is the signature of "Alpha Company by Gail, President." What type of instrument is this? Is it negotiable? Who, if anyone, is primarily liable on this instrument on May 1? On May 5? Who, if anyone, is secondarily liable on this instrument?
Q:
GR8 Products, Inc., warrants its goods to be free of defects. If Heck issues an instrument to obtain goods from GR8 that prove defective, Heck can avoid paying on the instrument
A.only if it is a check.
B.only if it is a note.
C.whether it is a check or a note.
D.under no circumstances.
Q:
Vera gives Willy a $500 check as payment for a debt. Willy crudely raises the amount of the check to $5,000 and transfers it to Xtreem Sportz store for a new bike. Xtreem deposits the check in its Yankee Bank account. Vera is liable for the payment of $5,000 to
A.no one.
B.Willy, Xtreem Sportz, and Yankee Bank.
C.Willy only.
D.Xtreem Sportz and Yankee Bank only.
Q:
Opal asks Paolo, who does not understand English, to sign what Opal says is an application to open a bank account. In fact, the "application" is a note. If sued on the note by an HDC, Paolo's best defense would be
A.extreme duress.
B.fraud in the execution.
C.fraud in the inducement.
D.mistake.
Q:
Rodeo Ranch's agent Slim is authorized to draw checks on Rodeo Ranch's account in Town Bank. Upper Range Corporation is a Rodeo Ranch supplier. Slim writes a check "pay to the order of Upper Range [signed] Slim," indorses the check in Upper Range's name, and deposits it in his account in Verity Bank. If Verity Bank collects payment, the ultimate party most likely to suffer the loss is
A.no one.
B.Rodeo Ranch.
C.Town Bank.
D.Upper Range.
Q:
Bob writes a check on his account at County Bank to Dona, a famous singer. The person claiming to be Dona is an imposter, however, named Edy. Edy indorses the check to Frank, for whom County Bank cashes it. Ultimately, the loss will most likely fall on
A.Bob.
B.County Bank.
C.Dona.
D.Frank.
Q:
Fact Pattern 16-2
Jake is the maker of a $2,000 promissory note payable to Kim. Kim indorses the note to Lou who, in turn, indorses it to Mona, who then indorses it to Nat, the present holder.
Refer to Fact Pattern 16-2. Suppose that Mona pays Nat on the note. With timely notice to the proper parties, Mona may collect payment on the note from
A.Jake, Kim, or Lou.
B.Jake or Kim only.
C.Lou only.
D.no one.
Q:
Fact Pattern 16-2
Jake is the maker of a $2,000 promissory note payable to Kim. Kim indorses the note to Lou who, in turn, indorses it to Mona, who then indorses it to Nat, the present holder.
Refer to Fact Pattern 16-2. Nat properly presents the note to Jake for payment, but Jake dishonors it. With timely notice to the proper parties, Nat may collect payment on the note from
A.Kim, Lou, or Mona.
B.Kim or Lou only.
C.Mona only.
D.no one.
Q:
State Bank receives a check drawn by Tricia. The check is received after the established "cutoff" hour. Payment can be postponed without dishonor
A.indefinitely.
B.under no circumstances.
C.unless Tricia personally demands acceptance.
D.until the close of the next business day.
Q:
Nero signs a check "pay to the order of Olive" drawn on Nero's account in Plum Bank. Olive signs the back of the check. Secondary liability on this check extends to
A.Nero and Olive only.
B.Nero and Plum Bank only.
C.Nero only.
D.Plum Bank only.
Q:
Don writes a check to Eve drawn on Don's account at First Bank. Eve presents the check for payment to First Bank, which accepts it. The bank is
A.not liable for payment.
B.primarily liable for payment.
C.secondarily liable for payment.
D.simultaneously liable, with Don, for payment.
Q:
Superior Company draws a check payable to Ted. Uri makes a note payable to Vital Finance Corporation. Primarily liable parties include
A.neither Superior nor Uri.
B.Superior and Uri.
C.Superior only.
D.Uri only.
Q:
Biff signs a note "payable to the order of County Credit Union." Unless Biff has a valid defense against payment, Biff's liability on this note is
A.lateral.
B.primary.
C.secondary.
D.tertiary.
Q:
Pola wants to transfer a check to Quin. The check is defective if it
A.has been previously dishonored.
B.has no irregularities on its face.
C.is not overdue.
D.is so complete that no element of negotiability is lacking.
Q:
Nina wants to transfer a check to Opie. The check is not defective if it
A.has an obvious irregularity on its face.
B.has been previously honored.
C.is incomplete so that an element of negotiability is lacking.
D.is overdue.
Q:
Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in good faith. Mia knows that Kris breached the contract underlying the note, giving Liu a defense against payment. With respect to this note, Mia is
A.a knowledgeable holder in due course.
B.an ordinary holder.
C.an ordinary holder in due course.
D.an ordinary note taker.
Q:
Jen makes a gift of a check to Kilroy who takes it in good faith and without notice of any claim, defense, or defect. With respect to this check, Kilroy is
A.an extraordinary holder in due course.
B.an ordinary check passer.
C.an ordinary holder.
D.an ordinary holder in due course.
Q:
Owen is a holder of a promissory note obtained from Purchase Money, Inc. Regarding the defenses against payment of the note to which Purchase Money is subject, Owen, as an ordinary holder, is subject to
A.more defenses.
B.no defenses.
C.some defenses, but not as many.
D.the same defenses.
Q:
To pay for a new desk bought at Office Outlet, Pete makes a check payable to "Offs Outlet." A proper indorsement of the check is
A."Office Outlet" only.
B."Offs Outlet" only.
C."Office Outlet" or "Offs Outlet."
D."Pete" only.
Q:
Todd indorses a check, "Pay to Interstate Trucking if they deliver the lumber by May 1, 2013." This is
A.a blank indorsement.
B.a qualified indorsement.
C.a restrictive indorsement.
D.a special indorsement.
Q:
On the back of a check payable to Nero, he writes "Pay to Odell, without recourse" and signs it. This
A.does not effect the check's negotiability or any party's liability.
B.relieves Nero of liability on the check.
C.relieves Odell of liability on the check.
D.renders the check nonnegotiable.
Q:
Vladimir negotiates a bearer instrument to Wendy by
A.assignment.
B.delivery.
C.presenting it in response to a demand by Wendy.
D.promising to pay.
Q:
Petra signs a check payable to Quincy, who indorses the back, gives it to Regional Credit Union, and receives cash. The transfer of the check from Quincy to the credit union is
A.an assignment.
B.a negotiation.
C.a payment.
D.a sale.