Question 1

Roald writes a check for $700 to Savannah. Savannah indorses the check in blank and transfers it to Twitchell, who alters the check to read $7,000 and presents it to Union Bank, the drawee, for payment. The bank cashes it. Roald discovers the alter?ation and files a suit against the bank. Roald can recover

Accepted Answer

A)  $7,000. 
B)  $6,300. 
C)  $700. 
D)  0.

Question 2

Dru signs a check "pay to the order of Eppie" drawn on Dru's account in Bayside Bank. Greta forges Eppie's indorsement. Bayside pays the check. Most likely

Accepted Answer

A)  Dru will be liable for the amount. 
B)  Eppie will have to pay Dru for the amount. 
C)  Bayside will have to recredit Dru's account. 
D)  the Federal Reserve will reimburse all parties for their costs.

Question 3

Fact Pattern 14-1 (Questions 19 and 20 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 14-1. 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 4

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 5

A bank may not pay any checks on a customer's account after the date of the customer's death.

Accepted Answer

A) True 
 B)False

Question 6

Mary writes a check drawn on County Bank for $400 "payable to Bill" on May 1. Mary dies on May 3. Bill presents the check to County Bank on May 5. County Bank

Accepted Answer

A)  may not pay the check. 
B)  may pay the check. 
C)  must consult with Mary's heirs before paying the check. 
D)  must read Mary's will before paying the check.

Question 7

Fact Pattern 14-2 (Questions 30-31 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 14-2. Digital's bank is

Accepted Answer

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

Question 8

The incompetence of a customer revokes a bank's authority to pay an item.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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 11

Finance Bank receives a check drawn on the account of Get-Rich Industries, Inc., one of the bank's customers, at 3 p.m. Friday. Hildy, the pre?senter of the check, is not one of the bank's customers. The bank uses de?ferred posting with a 2 p.m. cutoff hour. If it decides to dis?honor the check, it must do so by midnight

Accepted Answer

A)  Saturday. 
B)  Sunday. 
C)  Monday. 
D)  Tuesday.

Question 12

A bank that encodes information on an item after its issue warrants to any subsequent bank that the information is correct.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

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.

Question 14

Martha has a checking account with Homeplace Bank. Martha signs a check "payable to Phillipa" drawn on Martha's account. Homeplace Bank is

Accepted Answer

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

Question 15

A bank may contractually shift to the customer the risk of forged checks created by the use of facsimile or other nonmanual signatures.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 18

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

Accepted Answer

A) True 
 B)False

Question 19

An oral stop payment order is valid for fourteen days.

Accepted Answer

A) True 
 B)False

Question 20

If a customer does not have sufficient funds to pay a check available in his or her checking account and the bank dishonors the check, the bank is liable to the customer.

Accepted Answer

A) True 
 B)False

Exam 14: Checks and Banking in the Digital Age

Dru signs a check "pay to the order of Eppie" drawn on Dru's account in Bayside Bank. Greta forges Eppie's indorsement. Bayside pays the check. Most likely

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 bank may not pay any checks on a customer's account after the date of the customer's death.

Mary writes a check drawn on County Bank for $400 "payable to Bill" on May 1. Mary dies on May 3. Bill presents the check to County Bank on May 5. County Bank

Fact Pattern 14-2 (Questions 30-31 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 14-2. Digital's bank is

The incompetence of a customer revokes a bank's authority to pay an item.

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

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

A bank that encodes information on an item after its issue warrants to any subsequent bank that the information is correct.

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

Martha has a checking account with Homeplace Bank. Martha signs a check "payable to Phillipa" drawn on Martha's account. Homeplace Bank is

A bank may contractually shift to the customer the risk of forged checks created by the use of facsimile or other nonmanual signatures.

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

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

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

An oral stop payment order is valid for fourteen days.

If a customer does not have sufficient funds to pay a check available in his or her checking account and the bank dishonors the check, the bank is liable to the customer.