Question 1

John writes a check to Kayla as payment for a DVD player but soon discov?ers the player is broken.He goes to the drawee bank and orally author?izes Larry,a bank officer,to stop payment on the check.This order is valid for

Accepted Answer

A) fourteen days. 
B) fourteen months. 
C) thirty days. 
D) six months.

Question 2

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

Accepted Answer

A) a cashier's check. 
B) an overdraft. 
C) a certified check. 
D) a stale check.

Question 3

Jen signs a check "pay to the order of Key" drawn on Jen's account in Little Bank to buy Key's car.If there are insufficient funds in Jen's account to cover the amount of the check,but the bank pays it,this creates

Accepted Answer

A) a cashier's check. 
B) an overdraft. 
C) a stale check. 
D) a stop-payment order.

Question 4

Fact Pattern 25-1 (Questions 17 and 18 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 25-1.Capital Bank

Accepted Answer

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.

Question 5

Smith & Jones Associates is a business customer of Superior Bank.Under federal law,Smith & Jones cannot demand

Accepted Answer

A) any proof of payment except Superior's good faith. 
B) monthly statements. 
C) recrediting of its account on payment of a forged item. 
D) the return of its original checks with its monthly statements.

Question 6

Fact Pattern 25-2 (Questions 27-28 apply)
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 ac?count at First National Bank.
-Refer to Fact Pattern 25-2.Tom's bank is

Accepted Answer

A) the cashing bank. 
B) the depositary bank. 
C) the intermediary bank. 
D) the payor bank.

Question 7

A point-of-sale system is a type of electronic fund transfer system.

Accepted Answer

A) True 
 B)False

Question 8

A customer who writes a bad check may be subject to criminal prosecution.

Accepted Answer

A) True 
 B)False

Question 9

A customer must examine a bank statement and report any discovered forged signa?ture to recover from the bank for the forgery.

Accepted Answer

A) True 
 B)False

Question 10

Julia opens a checking account with Washington Bank and deposits funds into the account.Julia and Washington Bank

Accepted Answer

A) do not have a contractual relationship. 
B) have a creditor-debtor relationship in which Julia is the creditor and Washington Bank is the debtor. 
C) have a creditor-debtor relationship in which Washington Bank is the creditor and Julia bank is the debtor. 
D) do not have a creditor-debtor relationship.

Question 11

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 signa?ture 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 negli?gent,discovers the forgeries and asks First National to recredit its ac?count.Who suffers the loss on each check?

Accepted Answer

The answer of Hoppy steals two checks from Eagle Retail...

Question 12

Jacob writes Phillip an uncertified check for $500 on January 1.Seven months later,Phillip presents the check at the bank.The bank pays the check in good faith without consulting Jacob.The bank

Accepted Answer

A) does not have the right to charge Jacob's account for $500. 
B) only has the right to charge Jacob's account for $250. 
C) has the right to charge Jacob's account for $500. 
D) can be held liable for breach of contract.

Question 13

Albert buys a surround sound system from his neighbor George at George's garage sale.Albert writes George a check for $250 for the sound system.George is

Accepted Answer

A) the certifier. 
B) the drawee. 
C) the drawer. 
D) the payee.

Question 14

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

Accepted Answer

A) Simon. 
B) Trudy. 
C) United Bank. 
D) First Federal Bank.

Question 15

Best Banking Bank creates a paper reproduction of customer Sophie's check with the statement "This is a legal copy of your check.You can use it in the same way you would use the original check." This is a

Accepted Answer

A) certified check. 
B) cashier's check. 
C) substitute check. 
D) void check.

Question 16

An oral stop payment order is valid for fourteen days.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) a cashier's check. 
B) an overdraft. 
C) a stale check. 
D) a stop-payment order.

Question 18

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

Accepted Answer

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.

Question 19

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

Accepted Answer

A) the certifier. 
B) the drawee. 
C) the drawer. 
D) the payee.

Question 20

Fact Pattern 25-2 (Questions 27-28 apply)
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 ac?count at First National Bank.
-Refer to Fact Pattern 25-2. Digital's bank is

Accepted Answer

A) the cashing bank. 
B) the depositary bank. 
C) the intermediary bank. 
D) the payor bank.

Exam 25: Checks and Banking in the Digital Age

John writes a check to Kayla as payment for a DVD player but soon discov?ers the player is broken.He goes to the drawee bank and orally author?izes Larry,a bank officer,to stop payment on the check.This order is valid for

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.If there are insufficient funds in Jen's account to cover the amount of the check,but the bank pays it,this creates

Smith & Jones Associates is a business customer of Superior Bank.Under federal law,Smith & Jones cannot demand

Fact Pattern 25-2 (Questions 27-28 apply) 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 ac?count at First National Bank. -Refer to Fact Pattern 25-2.Tom's bank is

A point-of-sale system is a type of electronic fund transfer system.

A customer who writes a bad check may be subject to criminal prosecution.

A customer must examine a bank statement and report any discovered forged signa?ture to recover from the bank for the forgery.

Julia opens a checking account with Washington Bank and deposits funds into the account.Julia and Washington Bank

Jacob writes Phillip an uncertified check for $500 on January 1.Seven months later,Phillip presents the check at the bank.The bank pays the check in good faith without consulting Jacob.The bank

Albert buys a surround sound system from his neighbor George at George's garage sale.Albert writes George a check for $250 for the sound system.George 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

Best Banking Bank creates a paper reproduction of customer Sophie's check with the statement "This is a legal copy of your check.You can use it in the same way you would use the original check." This is a

An oral stop payment order is valid for fourteen days.

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

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

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

Fact Pattern 25-2 (Questions 27-28 apply) 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 ac?count at First National Bank. -Refer to Fact Pattern 25-2. Digital's bank is