Question 1

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 2

A bank is not responsible for determining whether a signature on a customer's check is genuine.

Accepted Answer

A) True 
 B)False

Question 3

A bank has no right to charge a customer's account for the amount of a stale check.

Accepted Answer

A) True 
 B)False

Question 4

Commercial banking practices consider a check that has been outstanding for three months to be a stale check.

Accepted Answer

A) True 
 B)False

Question 5

Fact Pattern 22-2 
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 ac?count at First National Bank.
-Refer to Fact Pattern 22-2. Tom's bank is

Accepted Answer

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

Question 6

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 7

Fact Pattern 22-1 
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 22-1. Capital Bank pays the check. Capital

Accepted Answer

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.

Question 8

On Monday, Michelle deposits in her account at Fiscal Bank a local check for $500. After 5:00 p.m. on Friday, from these funds, Michelle can withdraw no more than

Accepted Answer

A)  $100. 
B)  $400. 
C)  $500. 
D)  $600.

Question 9

Kris presents an instrument that states "pay to the order of Kris" 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

Accepted Answer

A)  a commercial wire transfer. 
B)  a check. 
C)  a debit card transaction receipt. 
D)  a cash transaction

Question 10

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 11

The rights and duties of a bank and its customer are contractual.

Accepted Answer

A) True 
 B)False

Question 12

The Uniform Commercial Code governs checks.

Accepted Answer

A) True 
 B)False

Question 13

Stored-value cards are a form of digital cash.

Accepted Answer

A) True 
 B)False

Question 14

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 15

The first bank to receive a check for payment is the depositary bank.

Accepted Answer

A) True 
 B)False

Question 16

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 17

Ellen pays State Bank $500 plus a service fee to draw a check on itself payable to Paul's Plumbing. Which of the following parties is responsible for paying the check?

Accepted Answer

A)  Only Ellen 
B)  Both Ellen and State Bank 
C)  Only State Bank 
D)  None of the parties

Question 18

A forged signature is effective as the signature of a drawer to the extent that is resembles the drawer's actual signature.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

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.

Exam 22: Checks and Banking in the Digital Age

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 bank is not responsible for determining whether a signature on a customer's check is genuine.

A bank has no right to charge a customer's account for the amount of a stale check.

Commercial banking practices consider a check that has been outstanding for three months to be a stale check.

Fact Pattern 22-2 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 ac?count at First National Bank. -Refer to Fact Pattern 22-2. Tom's bank 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

On Monday, Michelle deposits in her account at Fiscal Bank a local check for $500. After 5:00 p.m. on Friday, from these funds, Michelle can withdraw no more than

Kris presents an instrument that states "pay to the order of Kris" 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 customer must examine a bank statement and report any discovered forged signa?ture to recover from the bank for the forgery.

The rights and duties of a bank and its customer are contractual.

The Uniform Commercial Code governs checks.

Stored-value cards are a form of digital cash.

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

The first bank to receive a check for payment is the depositary bank.

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

Ellen pays State Bank $500 plus a service fee to draw a check on itself payable to Paul's Plumbing. Which of the following parties is responsible for paying the check?

A forged signature is effective as the signature of a drawer to the extent that is resembles the drawer's actual signature.

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

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