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Q:
Efrem owns Fans & Players, a retail sporting goods shop. When Great Hill Lodge, a new ski resort, is built in the area, Efrem decides to expand and borrows a large sum from Hometown Bank. The bank takes a security interest in Efrem's present inventory and any after-acquired inventory as collateral for the loan. The bank properly perfects the security interest by filing a financing statement. Efrem's business is profitable, and he begins doubling his inventory. A year later, an avalanche destroys the ski slope and lodge. Efrem's business takes a turn for the worse, and he defaults on his debt to the bank. The bank seeks possession of his entire inventory, even though the inventory is twice as large as it was when the loan was made. Efrem claims that the bank has rights to only half of his inventory. Is Efrem correct? Explain.
Q:
Sara needs $1,513 to buy textbooks and other school supplies. Tomas agrees to loan Sara $1,513, accepting as collateral Tomas's car. They put their agreement in writing and sign it. Sara keeps possession of the car. Does Tomas have an enforceable security interest? How can Tomas let other creditors know of his interest in the car?
Q:
Hal's Hardware store defaults on a debt to Intrastate Bank, which takes possession of the collateral securing the debt. Intrastate sells the collateral. The proceeds from the sale are applied first to
A.Hal's debt to Intrastate.
B.Hal's debts to other creditors.
C.Intrastate's fees for the sale.
D.payments Hal's made on the debt to Intrastate.
Q:
Computer World (CW), after repossessing a multimedia system from Dave, a consumer, decides to keep the system instead of reselling it. CW sends written notice to Dave. CW can now keep the system
A.only after attempting an unsuccessful public sale of the system.
B.only after notifying any other appropriate secured party.
C.unless Dave objects.
D.under any circumstances.
Q:
Green Landscape Company buys a backhoe on credit from Heavy Equipment Corporation, but does not make a payment on the loan for several months. Heavy repossesses the backhoe by towing it from a public street. Green sues Heavy for breach of the peace. Green will probably
A.not prevail, because Heavy did not use judicial process.
B.not prevail, because the repossession was not a breach of the peace.
C.prevail, because Green did not default on the loan.
D.prevail, because the repossession was a breach of the peace.
Q:
Elias repays his debt, incurred to buy consumer goods, to Fidelity Bank and immediately files a written request for a termination statement. Fidelity
A.must comply within one month of receipt of the letter.
B.must comply within twenty days of receipt of the letter.
C.must refund $513 to Elias.
D.need not comply.
Q:
Khalil holds a security interest in inventory owned by Luc. Khalil assigns his interest in the inventory to Mal. Mal becomes the secured party of record
A.automatically.
B.if Khalil advises Luc of the assignment.
C.if Mal advises Luc of the assignment.
D.if Mal files a uniform amendment form.
Q:
Quotient Financial Corporation is a secured party with a security interest in property owned by Retail Sales Company. Perfection of this security interest may not protect Quotient Financial against the claim of
A.a bank.
B.a buyer in the ordinary course of business.
C.a subsequent lien creditor.
D.a trustee in bankruptcy.
Q:
Expert Capital Company and Frugal Financial Bank are secured parties with security interests in property owned by Grande Corporation. Between these security interests, the first to be filed or perfected has priority over other filed or perfected security interests in
A.most circumstances.
B.no circumstances.
C.states that have not adopted Article 9 of the UCC.
D.states that require a security agreement to be signed and dated by the creditor.
Q:
Idle Investments, Inc., and Harbor Bank are secured parties with security interests in property owned by GR8 Manufacturing Corporation. Priority between these security interests is generally determined by
A.the amount of the claim.
B.the custom in the trade.
C.the time of perfection.
D.the time the security agreement was signed.
Q:
Fact Pattern 18-2
General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1 million from Helpful Finance Corporation for a security interest in the equipment. The next day, GLC borrows $513,000 from Interstate Bank, also for a security interest in the equipment. GLC defaults on the loans.
Refer to Fact Pattern 18-2. Suppose that two weeks after GLC takes possession of the equipment, Helpful and Interstate file financing statements, with Interstate filing first. In that circumstance, the party with priority to the equipment is
A.GLC.
B.Helpful and Interstate proportionately.
C.Helpful only.
D.Interstate only.
Q:
Fact Pattern 18-2
General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1 million from Helpful Finance Corporation for a security interest in the equipment. The next day, GLC borrows $513,000 from Interstate Bank, also for a security interest in the equipment. GLC defaults on the loans.
Refer to Fact Pattern 18-2. Suppose that Helpful perfects its security interest when GLC takes possession of the equipment. In that circumstance, the party with priority to the collateral on GLC's default would be
A.GLC.
B.Helpful and Interstate proportionately.
C.Helpful only.
D.Interstate only.
Q:
Middling Credit Corporation asks Little Supply Company to agree to a security agreement that provides for coverage of the proceeds from the sale of after-acquired property. This is
A.a first-in, first-out rule.
B.a floating lien.
C.a funds guaranty.
D.in violation of secured transactions law.
Q:
City Bank's financing statement in collateral owned by Delta Waters Corporation will expire in less than a year. Filed timely, a continuation statement could extend the effectiveness of the financing statement for
A.one year.
B.two years.
C.five years.
D.ten years.
Q:
Prime Property Investments, Inc., files a financing statement to provide notice of its security interest in the property of Qwik Breakfast Restaurant. The initial effective term of a financing statement is a period of
A.five days.
B.five months.
C.five weeks.
D.five years.
Q:
Select Furniture Store sells household consumer goods. To create a purchase-money security interest, Select Furniture must
A.assign, to a collecting agent, a portion of its accounts payable.
B.assign, to a collecting agent, a portion of its accounts receivable.
C.extend credit for part or all of the purchase price of the goods.
D.refer purchasers to a third-party lender.
Q:
Everyday Loans, Inc., takes possession of Ferbie's stock in Glade Electronics Corporation to perfect Everyday's security interest in the stock. This is
A.after-acquired property.
B.a pledge.
C.a purchase-money security interest.
D.proceeds.
Q:
Hoppy steals two checks from Eagle Retail Stores, Inc.: a blank check and a check payable to the order of General Supplies Company (GSC), drawn on Eagle's account with First National Bank. Hoppy forges Eagle's signature on the blank check and makes it payable to himself. Hoppy forges GSC's indorsement on the back of the check payable to GSC, and adds "Pay to the order of Hoppy." At Friendly Credit, Inc., Hoppy indorses the back of both checks with his own name and gives them to Friendly for cash. Friendly does not know about the theft or the forged signatures and presents the checks to First National, which pays them. Eagle, which was not negligent, discovers the forgeries and asks First National to recredit its account. Who suffers the loss on each check?
Q:
Tiny authorizes United Bank to make transfers from his account to make payments on his debt to Vic's Auto Dealership, which sold Tiny the car that serves as collateral for the debt. After three payments, Vic's repossesses the car and refuses to return it. Tiny phones the bank to stop the payments and follows up with a confirming letter. The bank fails to stop the next two payments, and Vic's refuses to refund anything. Can Tiny get his money from the bank? Explain.
Q:
E-Bank, an online financial institution, gives financial information about Paula and other customers to a federal agency without the customers' permission. E-Bank may be liable under
A.the Federal Trade Commission Act.
B.the Financial Services Modernization Act.
C.the Right to Financial Privacy Act.
D.the Uniform Electronic Transactions Act.
Q:
Paris knowingly divulges to Media Exposure magazine information about Randy's e-money payments to City Bank. The payments were in transmission to City Bank when Paris, without the consent of Randy or City Bank, discovered and revealed them. This may be a violation of
A.the Electronic Communications Privacy Act.
B.the Federal Reserve Board's Regulation E.
C.the Right to Financial Privacy Act.
D.the Uniform Electronic Transactions Act.
Q:
Fact Pattern 17-3
Mike loses his National Bank access card. He realizes his loss the next day but waits a week to call National. Meanwhile, Opal finds and uses Mike's card to withdraw $3,000 from Mike's account.
Refer to Fact Pattern 17-3. When Mike receives his National statement, he demands that the bank investigate the matter and recredit his account. The bank
A.has no duty to investigate.
B.must investigate and, if the dispute is not resolved within ten days, recredit Mike's account (at least until the dispute is resolved).
C.must investigate and immediately recredit Mike's account (at least until the dispute is resolved).
D.must investigate but need not recredit Mike's account.
Q:
Fact Pattern 17-3
Mike loses his National Bank access card. He realizes his loss the next day but waits a week to call National. Meanwhile, Opal finds and uses Mike's card to withdraw $3,000 from Mike's account.
Refer to Fact Pattern 17-3. Mike is responsible for
A.$0.
B.$50.
C.$500.
D.$3,000.
Q:
Dina's debit card, issued by Eminent Bank, is stolen and used without Dina's permission. Dina tells Eminent Bank within thirty days. Dina may be required to pay no more than
A.$5.
B.$50.
C.$500.
D.$5,000.
Q:
Guaranty Bank receives a check drawn on the account of Get-Rich Industries, Inc., one of the bank's customers, at 3 p.m. Friday. Garry, the presenter of the check, is not one of the bank's customers. The bank uses deferred posting with a 2 p.m. cutoff hour. If it decides to dishonor the check, it must do so by midnight
A.Saturday.
B.Sunday.
C.Monday.
D.Tuesday.
Q:
Fact Pattern 17-2
Tom draws a check, on his account in State Bank in New York, payable to Digital Media, Inc., in San Francisco. Digital deposits the check in its account at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve Bank sends the check to State Bank.
Refer to Fact Pattern 17-2. When Digital's bank received the check, it was required to pass it on
A.before midnight of the next banking day.
B.before midnight of the next day, even if it was not a "banking" day.
C.before noon of the next banking day.
D.within five business days.
Q:
Fact Pattern 17-2
Tom draws a check, on his account in State Bank in New York, payable to Digital Media, Inc., in San Francisco. Digital deposits the check in its account at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve Bank sends the check to State Bank.
Refer to Fact Pattern 17-2. Tom's bank is
A.the cashing bank.
B.the depositary bank.
C.the intermediary bank.
D.the payor bank.
Q:
Fact Pattern 17-2
Tom draws a check, on his account in State Bank in New York, payable to Digital Media, Inc., in San Francisco. Digital deposits the check in its account at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve Bank sends the check to State Bank.
Refer to Fact Pattern 17-2. Digital's bank is
A.the cashing bank.
B.the depositary bank.
C.the intermediary bank.
D.the payor bank.
Q:
On Monday, Eve deposits in her account at Fiscal Bank a local check for $500. After 5:00 p.m. on Friday, from these funds, Eve can withdraw no more than
A.$100.
B.$400.
C.$500.
D.$600.
Q:
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.
Q:
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.
Q:
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.
Q:
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.
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.