Question 1

A check is always payable on ____________________.

Accepted Answer

The answer of A check is always payable on ____________________....

Question 2

A postdated check is

Accepted Answer

A postdated check is intended to be payable on the date written on the check, not before. This means it is payable on its due date, not upon immediate presentation if that date is in the future.

Question 3

To hold a bank liable for a forged signature, after the canceled check has been returned, the drawer has to report the forgery within

Accepted Answer

The Uniform Commercial Code (UCC) requires that a drawer report a forged signature to the bank within 30 days of receiving the canceled check.

Question 4

Franklin wrote a check on the Second National Bank payable to Garth. When Garth presented the check for payment, Second National refused to cash it, although the check was in proper form and Franklin had sufficient funds on deposit at the bank. The Second National Bank is liable to

Accepted Answer

The bank is liable to Franklin only because it breached its contract with him by refusing to honor a properly drawn check when there were sufficient funds. Garth, as the payee, does not have a direct contractual relationship with the bank.

Question 5

When Dale received his bank statement, he examined the canceled checks returned with the statement and discovered that one check had been signed with Dale's name by an unauthorized person. Dale immediately informed the bank. Should Dale's checking account have been charged by the bank for the amount of this particular check?

Accepted Answer

The bank is responsible for verifying the authenticity of the signatures on the checks it processes. If a check is cashed with a forged signature, the bank is liable for the mistake, not the account holder who did not authorize the signature.

Question 6

A depositor's personal check that the bank guarantees to pay is a

Accepted Answer

A certified check is a personal check written by a bank customer and guaranteed by the bank itself. The bank verifies that the signature is genuine and that the depositor has enough funds to cover the check, then sets aside the check amount until it is cashed or deposited.

Question 7

New World Bank paid a check issued by Fermi, a depositor, that had been altered from $50 to $500. The amount Fermi can recover from the bank is

Accepted Answer

Fermi can recover the altered amount, which is $450, because the bank is liable for paying the altered check amount beyond the original $50.

Question 8

If a bank dishonors a check for no good reason, the customer can collect from the bank

Accepted Answer

The answer of If a bank dishonors a check for...

Question 9

If a drawer has a check certified, the drawer is still ____________________ liable for payment of the check.

Accepted Answer

The answer of If a drawer has a check certified,...

Question 10

Jamison wrote a check for $500 drawn on Charter Bank and gave it to Donalson. When Donalson presented the check for payment the bank dishonored it for insufficient funds. Donalson may sue:

Accepted Answer

Donalson can sue Jamison because Jamison is the one who wrote the check that was dishonored due to insufficient funds. The bank, Charter Bank, is not liable to Donalson as it only acts on behalf of its customer, Jamison, in this context.

Question 11

A check written for an amount greater than the amount the depositor has in his or her account is called a(n) ____________________.

Accepted Answer

The answer of A check written for an amount greater...

Question 12

When a check is certified, the certifying bank

Accepted Answer

When a bank certifies a check, it guarantees that the check will be paid, essentially confirming that the drawer has sufficient funds in their account for the check amount.

Question 13

Reynolds sent Winston a check for $1,000 as payment on a debt. The check was dated March 1, but Winston did not present the check to Wider National Bank, the drawee, until October 8 the same year. If Wider National Bank refuses to pay the check, claiming it is stale, then it becomes liable to

Accepted Answer

A check is considered stale if it is presented more than six months after its date. Banks are not obligated to honor stale checks, and if they refuse to pay, they are not liable to either the drawer (Reynolds) or the payee (Winston).

Question 14

A written stop-payment order is effective for

Accepted Answer

A written stop-payment order is generally effective for six months.

Question 15

Jenks requested a bank in Boston to write him a check on its own funds so that he would be able to pay a bill. This check is legally known as a

Accepted Answer

A cashier's check is a check guaranteed by a bank, drawn on the bank's own funds and signed by a cashier.

Question 16

When a customer presents a merchant with a debit card to purchase goods, the transaction is called a(n)

Accepted Answer

When a customer uses a debit card to purchase goods at a merchant, the transaction is referred to as a POS (Point of Sale) transaction. This term describes the process where the sale is made and payment is processed at the point where the transaction occurs, typically through a terminal or other electronic device at the merchant's location.

Question 17

A check drawn on the bank's own funds is called a(n) ____________________.

Accepted Answer

The answer of A check drawn on the bank's own...

Question 18

A(n) ____________________ check is one that is dated after its actual date of issue.

Accepted Answer

The answer of A(n) ____________________ check is one that is...

Question 19

Traveler's checks are

Accepted Answer

Traveler's checks are indeed issued in set denominations for convenience, issued without a named payee to ensure they can be used by the purchaser or someone they designate, and are designed to be readily accepted all over the world as a secure form of payment for travelers.

Question 20

Renee made out a check payable to Dawn. Dawn had the check certified by First National, the drawee bank, and then indorsed it to Quatro, who is the present holder. What effect does certification have on the parties?

Accepted Answer

Certification of a check by the drawee bank (First National) means the bank accepts the check and becomes primarily liable for its payment. This discharges both the drawer (Renee) and the indorser (Dawn) from liability.

Quiz 22: Checks and the Banking System in the Twenty-First Century