Handy Hardware purchases 1200 metallic hooks from Heavy Metals for $1.25 each.Handy promises to pay the money in three months.Heavy Metals wants the money now,as well as keeping Handy as a customer.Heavy Metals (as drawer)drafts an instrument ordering Handy (as drawee)to pay $1500 to First Bank (the payee).This instrument is:
A)a check.
B)a promissory note.
C)a trade acceptance.
D)a payable on demand note.

Question

Quizplus · Accepted Answer

The instrument described is a trade acceptance. It is a type of draft, similar to a check, but used specifically in commercial transactions where a seller (in this case, Heavy Metals) wants to ensure they will receive payment at a later date. By drafting the trade acceptance, Heavy Metals can receive payment immediately from First Bank, while also securing payment from Handy at a future date. This instrument is commonly used in situations where a seller wants to extend credit to a buyer without assuming all the risk of non-payment.

Handy Hardware Purchases 1200 Metallic Hooks from Heavy Metals for $1.25