Question 1

First Community Bank agrees to accept a check by setting aside suffi?cient funds to cover the amount.This check is considered
A)cashed.
B)certified.
C)deposited.
D)provisionally credited.

Accepted Answer

When a bank agrees to accept a check by setting aside sufficient funds to cover the amount, it is called certifying the check. This means that the bank guarantees the amount of the check and that it will be honored when presented for payment. This is different from cashing a check, which involves giving the recipient the full amount of the check in cash, or depositing a check, which involves adding the funds to the recipient's account. Provisional credit refers to the temporary credit given to an account before a check has been fully processed and cleared.

Question 2

Elmer can write checks on his account at Finance City Bank.Gina steals the checks,forges Elmer's signature,and cashes the checks at Finance City.The bank is excused from any liability if,after receipt of the first forged check,Elmer fails to report the forgeries within
A)five days.
B)fourteen days.
C)one year.
D)three years.

Accepted Answer

Under the Uniform Commercial Code (UCC), a bank customer must report unauthorized signatures or alterations within one year from the time the bank statement is made available to them.

Question 3

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

Accepted Answer

The answer of Roald writes a check for $700 to...

Question 4

Liu signs a check "pay to the order of Marv" drawn on Liu's account in National Bank.Liu later orders National not to pay the check,but the bank pays it over Liu's order.Subsequent checks written on Liu's ac?count "bounce." Most likely liable for the costs to Liu is
A)any party to whom a subsequent check was written.
B)Liu.
C)Marv.
D)National.

Accepted Answer

National Bank is liable for the costs incurred by Liu due to their mistake of paying the check over Liu's order. As per the law, a bank is obligated to honor a check that is lawfully drawn, and any subsequent payments made by the bank are considered wrongful payments. Therefore, National Bank, and not Marv or any other party, is liable for the costs incurred by Liu due to the bounced checks.

Question 5

Thelma signs a check "pay to the order of Uri" drawn on Thelma's ac?count in Verity Bank.Thelma has $400 in her account but the amount of the check is $500,which the bank pays.This is
A)a dishonored check.
B)an overdraft.
C)a postdated check.
D)a stale check.

Accepted Answer

Thelma's check creates an overdraft, meaning she has withdrawn more money than she had in her account at the time of issuing the check. The bank has paid the check anyway, but Thelma will likely face overdraft fees and/or penalties.

Question 6

Paris knowingly divulges to Media Exposure magazine information about Randy's e-money payments to City Bank without the consent of Randy or City Bank.Paris may be in violation of federal law
A)if the e-payments were in transmission at the time.
B)if the e-payments have not yet been made.
C)if the e-payments are not represented by paper checks.
D)under none of these circumstances.

Accepted Answer

The federal law, specifically the Electronic Communications Privacy Act (ECPA), prohibits unauthorized interception and disclosure of electronic communications while they are in transmission.

Question 7

Shakira issues a check drawn on Thrifty Bank to United Office Supply to pay for six computer desks.Later,Shakira discovers defects in the goods and orders Thrifty to stop payment on the check.Shakira does not renew the order,and the bank clears the check eight months later.The bank
A)must recredit Shakira's account.
B)must obtain funds from United to cover the amount of the check.
C)must substitute acceptable goods.
D)need not recredit Shakira's account.

Accepted Answer

Once a check has been cleared, the bank has fulfilled its obligation to the customer. If Shakira wants to dispute the payment, she must take it up with United or pursue legal action. The bank is not responsible for the quality of the goods or for canceling a check based on a customer's request.

Question 8

Kareem writes a check for $1,000 drawn on Liberty Bank and presents it to Maris.Maris presents the check for payment to Liberty Bank,which dis?hon?ors it.The party most likely liable to Maris is
A)Kareem in a civil suit.
B)Kareem in a criminal prosecution.
C)Liberty Bank in an administrative proceeding.
D)the Federal Reserve.

Accepted Answer

Kareem is responsible for making sure the check is valid and has sufficient funds to cover it. Since Liberty Bank has dishonored it, Maris can go after Kareem in a civil suit to try and recover the money.

Question 9

Darwin signs a check "pay to the order of Eva Marie" drawn on Darwin's account in First Funds Bank and dates the check "April 1." Eva Marie presents the check to the bank for payment on November 12.This is
A)a stop-payment order.
B)an overdraft.
C)a postdated check.
D)a stale check.

Accepted Answer

The check is considered stale because it is presented for payment more than six months after the date written on it.

Question 10

Johnny writes a check to Katie as payment for a 3D DVD player but soon discov?ers the player is broken.He goes to the drawee bank and orally author?izes Sissy,a bank officer,to stop payment on the check.This order is valid for
A)fourteen days.
B)fourteen months.
C)six days.
D)six months.

Accepted Answer

An oral stop payment order is valid for fourteen days. After that, it must be confirmed in writing to remain effective.

Question 11

On Monday morning,Bob deposits into his account at County Bank a $500 check from Dyna,who also has an account at County Bank.On that same day,this check is considered
A)cashiered.
B)certified.
C)paid.
D)provisionally credited.

Accepted Answer

When a check is deposited, the funds are provisionally credited to the account holder's balance. This means that the money is not immediately available for withdrawal, and the bank must still process the check with the issuing bank to ensure that the funds are valid. Therefore, on Monday morning, Bob's $500 check from Dyna is considered provisionally credited.

Question 12

Brandy forges Caleb's signature on a check "payable to the order of Brandy" drawn on Caleb's account in Delphi Bank.Caleb's forged signa?ture is
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.

Accepted Answer

Forgery is illegal and any actions taken with a forged signature are not legally binding. Therefore, the forged signature is not effective and the check is not valid.

Question 13

Fact Pattern 27-1A (Questions A17 and A18 apply)
Mike loses his National Bank access card.He realizes his loss the next day but waits a week to call National.Meanwhile,Opal finds and uses Mike's card to withdraw $3,000 from Mike's account.
-Refer to Fact Pattern 27-1A.When Mike receives his National statement,he demands that the bank investigate the matter and recredit his ac?count.The bank
A)has no duty to investigate.
B)must investigate and,if the dispute is not resolved within ten days,recredit Mike's account (at least until the dispute is resolved).
C)must investigate and immediately recredit Mike's account (at least until the dispute is resolved).
D)must investigate but need not recredit Mike's account.

Accepted Answer

The bank must investigate the unauthorized transaction and, if the dispute is not resolved within ten days, recredit Mike's account at least until the dispute is resolved, as per the Electronic Fund Transfer Act (EFTA) regulations.

Question 14

eBank,an online financial institution,gives financial information about Frieda and other customers to a federal agency.eBank may be in viola?tion of federal law
A)if the agency did not have a warrant.
B)if the institution is not deemed to be a bank.
C)if the institution did not issue its customers credit or debit cards.
D)under none of these circumstances.

Accepted Answer

The answer of eBank,an online financial institution,gives financial information about...

Question 15

Fact Pattern 27-1A (Questions A17 and A18 apply)
Mike loses his National Bank access card.He realizes his loss the next day but waits a week to call National.Meanwhile,Opal finds and uses Mike's card to withdraw $3,000 from Mike's account.
-Refer to Fact Pattern 27-1A.Mike is responsible for
A)$0.
B)$50.
C)$500.
D)$3,000.

Accepted Answer

Mike is responsible for up to $500 because he waited more than two business days to report the loss of his card to the bank. If he had reported it within two business days, his liability would have been limited to $50 under the Electronic Fund Transfer Act. However, because he waited a week, his liability can be up to $500.

Question 16

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

Accepted Answer

Under federal law, business customers like Smith & Jones cannot demand the return of their original checks with their monthly statements.

Question 17

Scott presents an instrument that states "pay to the order of Scott" to Town Bank for payment.This instrument is the most common type of negotiable instrument,which is
A)a certificate of deposit.
B)a check.
C)a note.
D)a trade acceptance.

Accepted Answer

The instrument presented by Scott, which states "pay to the order of Scott", is a check. This is a type of negotiable instrument commonly used for payments and transactions. The other options (A, C, and D) are also types of negotiable instruments, but they are not applicable in the given scenario.

Question 18

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
A)a cashier's check.
B)a certified check.
C)a trade acceptance.
D)a traveler's check.

Accepted Answer

A cashier's check is a check drawn by a bank on itself, where the bank guarantees payment.

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

Accepted Answer

Rikki is the one who is writing and signing the check, so she is the drawer. The payee is Scholar University, who will receive the funds. The drawee is the bank where Rikki's account is held, as this is the institution that will be responsible for actually fulfilling the payment. The certifier would be someone who verifies that the funds are available in the account before the check is drawn, but there is no mention of this in the scenario.

Question 20

Drew signs a check "pay to the order of Eppie" drawn on Drew's account in Fidelity Bank.Greta forges Eppie's indorsement.Fidelity pays the check.Most likely
A)Drew will be liable for the amount.
B)Eppie will have to pay Drew for the amount.
C)Fidelity will have to recredit Drew's account.
D)the Federal Reserve will reimburse all parties for their costs.

Accepted Answer

Fidelity Bank is responsible for verifying endorsements before paying a check. Since Eppie's endorsement was forged, Fidelity must recredit Drew's account for the unauthorized payment.

Quiz 27: Checks and Banking in the Digital Age

First Community Bank agrees to accept a check by setting aside suffi?cient funds to cover the amount.This check is considered

Elmer can write checks on his account at Finance City Bank.Gina steals the checks,forges Elmer's signature,and cashes the checks at Finance City.The bank is excused from any liability if,after receipt of the first forged check,Elmer fails to report the forgeries within

Liu signs a check "pay to the order of Marv" drawn on Liu's account in National Bank.Liu later orders National not to pay the check,but the bank pays it over Liu's order.Subsequent checks written on Liu's ac?count "bounce." Most likely liable for the costs to Liu is

Thelma signs a check "pay to the order of Uri" drawn on Thelma's ac?count in Verity Bank.Thelma has $400 in her account but the amount of the check is $500,which the bank pays.This is

Paris knowingly divulges to Media Exposure magazine information about Randy's e-money payments to City Bank without the consent of Randy or City Bank.Paris may be in violation of federal law

Shakira issues a check drawn on Thrifty Bank to United Office Supply to pay for six computer desks.Later,Shakira discovers defects in the goods and orders Thrifty to stop payment on the check.Shakira does not renew the order,and the bank clears the check eight months later.The bank

Kareem writes a check for $1,000 drawn on Liberty Bank and presents it to Maris.Maris presents the check for payment to Liberty Bank,which dis?hon?ors it.The party most likely liable to Maris is

Darwin signs a check "pay to the order of Eva Marie" drawn on Darwin's account in First Funds Bank and dates the check "April 1." Eva Marie presents the check to the bank for payment on November 12.This is

Johnny writes a check to Katie as payment for a 3D DVD player but soon discov?ers the player is broken.He goes to the drawee bank and orally author?izes Sissy,a bank officer,to stop payment on the check.This order is valid for

On Monday morning,Bob deposits into his account at County Bank a $500 check from Dyna,who also has an account at County Bank.On that same day,this check is considered

Brandy forges Caleb's signature on a check "payable to the order of Brandy" drawn on Caleb's account in Delphi Bank.Caleb's forged signa?ture is

eBank,an online financial institution,gives financial information about Frieda and other customers to a federal agency.eBank may be in viola?tion of federal law

Fact Pattern 27-1A (Questions A17 and A18 apply) Mike loses his National Bank access card.He realizes his loss the next day but waits a week to call National.Meanwhile,Opal finds and uses Mike's card to withdraw $3,000 from Mike's account. -Refer to Fact Pattern 27-1A.Mike is responsible for

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

Scott presents an instrument that states "pay to the order of Scott" to Town Bank for payment.This instrument is the most common type of negotiable instrument,which is

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

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

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