Question 1

Faye forges Greta's signature on a check "payable to the order of Faye" drawn on Greta's account in Home Bank. Most likely, if the bank pays the check
A) the Federal Reserve will reimburse all parties for their costs.
B) the loss will be apportioned among all of the bank's customers.
C) Greta will be liable for the amount.
D) the bank will have to recredit Greta's account.

Accepted Answer

The bank is responsible for verifying signatures on checks. If it pays a check with a forged signature, it must recredit the account of the person whose signature was forged.

Question 2

Chad writes Dina an uncertified check for $500 drawn on Chad's account at Employees Credit Union. Seven months later, Dina presents the check for payment. The credit union pays the check in good faith without consulting Chad. The credit union
A) cannot charge Chad's account for any amount.
B) can charge Chad's account for $250 only.
C) can charge Chad's account for $500.
D) is liable for breach of contract.

Accepted Answer

When Dina presented the check for payment, the credit union paid it in good faith without consulting Chad. This means that the credit union assumed that Chad had sufficient funds in his account to cover the check. Therefore, the credit union can charge Chad's account for the full amount of the check, which is $500.

Question 3

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

Accepted Answer

Town Bank is most likely liable because it paid the check despite Ray's order to stop payment, which led to subsequent checks bouncing.

Question 4

Ally writes a check to Beri on Ally's account at Community Bank. The bank dishonors the check even though Ally has sufficient funds in her account. The bank is liable to
A) Ally.
B) Beri.
C) the payee on Ally's next check.
D) no one.

Accepted Answer

The bank is liable to Ally because it breached its duty to honor her check when there were sufficient funds in her account.

Question 5

Corky pays Debit Bank $500 plus a service fee to draw a check on itself payable to Electric Company. The party responsible for paying the check is
A) Corky only.
B) Corky and Debit Bank.
C) Debit Bank only.
D) Corky, Debit Bank, and Electric Company.

Accepted Answer

Debit Bank is responsible for paying the check because it is the bank that issued the check and is obligated to pay the amount to the Electric Company as per the terms of the check.

Question 6

Gillis writes a check to Harley as payment for a game player but soon discovers it is broken. He goes to the drawee bank and orally authorizes Ilene, a bank officer, to stop payment on the check. This order is valid for
A) fourteen days.
B) any stated period of time.
C) six days.
D) six months.

Accepted Answer

The answer of Gillis writes a check to Harley as...

Question 7

Brady forges Cal's signature on a check "payable to the order of Brady" drawn on Cal's account in Downtown Bank. Cal's forged signature is
A) effective if an innocent third party accepts the check.
B) effective to the degree that it matches Cal's genuine signature.
C) effective to the extent that the bank debits Cal's account.
D) not effective.

Accepted Answer

Forgery is illegal and any actions taken as a result of the forged document are not legally binding. Cal's signature was forged without his knowledge or consent, therefore the check is not effective and the bank should not debit Cal's account.

Question 8

Dan signs a check "pay to the order of Eton" drawn on Dan's account in Fidelity Bank and dates the check "May 1." Eton presents the check to the bank for payment on December 15. This is
A) a cashier's check.
B) an overdraft.
C) a certified check.
D) a stale check.

Accepted Answer

A check is considered stale if it is presented for payment more than six months after its date. In this case, Eton presented the check for payment on December 15, which is more than six months after the May 1 date on the check. Therefore, the check is considered stale and cannot be cashed.

Question 9

Rhea writes a check for $100 drawn on Savers Credit Union and presents it to Timpani Jewelers for payment. If the check is not backed by sufficient funds, Rhea may be prosecuted for
A) forgery.
B) fraud.
C) negligence.
D) all of the choices.

Accepted Answer

Rhea may be prosecuted for fraud if the check bounces due to insufficient funds, as this constitutes intentionally deceiving Timpani Jewelers into believing that she had enough money to cover the payment. Forgery and negligence are not applicable in this scenario.

Question 10

Quito writes a check to Roy on Quito's account at Sterling Bank. The bank dishonors the check because Quito has insufficient funds in his account. The bank is liable to
A) Quito.
B) Roy.
C) Quito, Roy, and the payees on Quito's subsequent checks.
D) no one.

Accepted Answer

The answer of Quito writes a check to Roy on...

Question 11

Bok buys an espresso machine from Coffee Gadgets, which bills him for $100. He writes out a check drawn on Dios Bank, but later, believing that the machine is defective, issues a stop-payment order. Dios
A) is liable to Coffee Gadgets for the amount of the check.
B) must stop payment if the bank has a reasonable time to act.
C) need not follow Bok's order because it was issued after the check.
D) need not follow Bok's order unless the check was certified.

Accepted Answer

If Bok issues a stop-payment order, Dios Bank must stop payment on the check if it has a reasonable time to act. This means that if Coffee Gadgets presents the check for payment before Dios receives the stop-payment order, the bank is not liable to the vendor. However, if the bank receives the order before the check is presented, it must not honor payment.

Question 12

Teri writes a check for $1,000 drawn on United Bank payable to Vida. Vida presents the check for payment to United Bank, which dishonors it. The party most likely liable to Vida is
A) Teri in a civil suit.
B) Teri in a criminal prosecution.
C) United Bank in a civil suit.
D) none of the choices.

Accepted Answer

Teri is the party liable for the dishonored check since she issued it. Vida may pursue legal action against Teri in a civil suit to recover the funds. United Bank may also face legal consequences for dishonoring the check, but they would not be liable to Vida in this scenario.

Question 13

Dallas presents an uncertified check for payment more than six months after its date. The check was drawn by Emma on her account in First Bank. If the bank follows the usual banking practice in such a case, it will
A) cash the check.
B) consult Emma.
C) refuse to cash the check.
D) ask Dallas what he would prefer.

Accepted Answer

Banks typically consult the account holder before cashing a check that is presented more than six months after its date, due to the risk of it being stale or no longer valid.

Question 14

Ruth takes her car to Service Center, which repairs the car and bills her for $500. She writes out a check drawn on Tempo Bank, but later, believing that Service Center did not fix the car properly, issues a stop-payment order. If Tempo pays the check, the bank
A) can sue Ruth for a wrongful stop-payment order.
B) can sue Service Center for breach of contract.
C) is liable to Service Center for the time and trouble to return the payment.
D) is liable for Ruth's loss due to the wrongful payment.

Accepted Answer

If Tempo Bank pays the check despite Ruth's stop-payment order, the bank is liable for Ruth's loss due to wrongful payment. Ruth has the right to stop payment on a check, but once a stop-payment order has been issued, the bank must honor it. If the bank pays the check after receiving the stop-payment order, it is acting wrongly, and Ruth could sue the bank to recover her losses. The bank could then try to recover the amount from Service Center, but that would be a separate issue.

Question 15

Shane issues a check drawn on Thrifty Bank to Farm Supply Store to pay for a rototiller. Later, Shane discovers a defect in the device and orders Thrifty to stop payment on the check. Shane does not renew the order, and the bank clears the check eight months later. The bank
A) must recredit Shane's account.
B) must obtain funds from Farm Supply to cover the check.
C) must substitute acceptable goods.
D) need not recredit Shane's account.

Accepted Answer

Once a check has been cleared, the bank has fulfilled its obligation and is not required to recredit the account. The responsibility now falls on the account holder to pursue reimbursement or exchange with the payee.

Question 16

Gary writes a check drawn on Hill Bank for $400 "payable to Ian" on May 1. Gary dies on May 3. Ian presents the check to the bank on May 5. Unaware of Gary's death, the bank
A) must certify the check.
B) may pay the check.
C) must consult with Gary's heirs before paying the check.
D) can do nothing until Ian claims an interest in the account.

Accepted Answer

When a check is presented to a bank, the bank's primary duty is to determine whether the check is properly payable. The bank's duty is to the person who presented the check (in this case, Ian), not to the drawer of the check (in this case, Gary). Therefore, the bank can pay the check without consulting with Gary's heirs or certifying the check. Since Gary has already authorized the payment of the check by writing it, the bank can legally pay the check even if Gary has passed away.

Question 17

Elmore pays Fidelity 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) an overdraft.
C) a stale check.
D) a stop-payment order.

Accepted Answer

Elmore's payment to Fidelity Bank and the service fee indicate that this is a cashier's check, which is a check that a bank draws on itself and guarantees payment.

Question 18

Mara has a checking account with North Bank. Mara signs a check "payable to Ovid" drawn on Mara's account. North Bank is
A) none of the choices.
B) the drawee.
C) the drawer.
D) the payee.

Accepted Answer

North Bank is the drawee because they are the financial institution responsible for paying the check. Mara is the drawer because she is the account holder who initiated the payment. Ovid is the payee because he is the intended recipient of the funds.

Question 19

Tomas signs a check "pay to the order of University Bookstore" drawn on his account in Verity Bank to pay for his textbooks. The bookstore deposits the check in its account in West Bank. Like most checks, this check is
A) virtual cash.
B) digital cash.
C) a special type of draft.
D) a type of electronic fund transfer.

Accepted Answer

The check is a special type of draft, which is a written order to pay a certain amount of money to a specific person or organization. It is not virtual cash or digital cash, as it requires manual processing and is not an electronic form of payment. While it is ultimately deposited into a bank account, it is not considered an electronic fund transfer because it involves physical paper and manual processing.

Question 20

Quinn signs a check "pay to the order of Ronda" drawn on Quinn's account in Suburban Bank. Quinn has $400 in his account but the amount of the check is $500, which the bank pays. This is
A) a dishonored check.
B) an overdraft.
C) a certified check.
D) a stale check.

Accepted Answer

This is an overdraft because Quinn does not have enough funds in his account to cover the amount of the check he wrote. The bank paid the full amount of the check, but Quinn will likely be charged an overdraft fee.

Quiz 24: Banking in the Digital Age

Faye forges Greta's signature on a check "payable to the order of Faye" drawn on Greta's account in Home Bank. Most likely, if the bank pays the check

Chad writes Dina an uncertified check for $500 drawn on Chad's account at Employees Credit Union. Seven months later, Dina presents the check for payment. The credit union pays the check in good faith without consulting Chad. The credit union

Ray signs a check "pay to the order of Stella" drawn on Ray's account in Town Bank. He later orders the bank not to pay the check, but the bank pays it over his order. Subsequent checks written on the account "bounce." Most likely liable for the costs to Ray is

Ally writes a check to Beri on Ally's account at Community Bank. The bank dishonors the check even though Ally has sufficient funds in her account. The bank is liable to

Corky pays Debit Bank $500 plus a service fee to draw a check on itself payable to Electric Company. The party responsible for paying the check is

Gillis writes a check to Harley as payment for a game player but soon discovers it is broken. He goes to the drawee bank and orally authorizes Ilene, a bank officer, to stop payment on the check. This order is valid for

Brady forges Cal's signature on a check "payable to the order of Brady" drawn on Cal's account in Downtown Bank. Cal's forged signature is

Dan signs a check "pay to the order of Eton" drawn on Dan's account in Fidelity Bank and dates the check "May 1." Eton presents the check to the bank for payment on December 15. This is

Rhea writes a check for $100 drawn on Savers Credit Union and presents it to Timpani Jewelers for payment. If the check is not backed by sufficient funds, Rhea may be prosecuted for

Quito writes a check to Roy on Quito's account at Sterling Bank. The bank dishonors the check because Quito has insufficient funds in his account. The bank is liable to

Bok buys an espresso machine from Coffee Gadgets, which bills him for $100. He writes out a check drawn on Dios Bank, but later, believing that the machine is defective, issues a stop-payment order. Dios

Teri writes a check for $1,000 drawn on United Bank payable to Vida. Vida presents the check for payment to United Bank, which dishonors it. The party most likely liable to Vida is

Dallas presents an uncertified check for payment more than six months after its date. The check was drawn by Emma on her account in First Bank. If the bank follows the usual banking practice in such a case, it will

Ruth takes her car to Service Center, which repairs the car and bills her for $500. She writes out a check drawn on Tempo Bank, but later, believing that Service Center did not fix the car properly, issues a stop-payment order. If Tempo pays the check, the bank

Shane issues a check drawn on Thrifty Bank to Farm Supply Store to pay for a rototiller. Later, Shane discovers a defect in the device and orders Thrifty to stop payment on the check. Shane does not renew the order, and the bank clears the check eight months later. The bank

Gary writes a check drawn on Hill Bank for $400 "payable to Ian" on May 1. Gary dies on May 3. Ian presents the check to the bank on May 5. Unaware of Gary's death, the bank

Elmore pays Fidelity Bank $1,000 plus a service fee to draw a check on itself made payable to Go Delivery Service. This is

Mara has a checking account with North Bank. Mara signs a check "payable to Ovid" drawn on Mara's account. North Bank is

Tomas signs a check "pay to the order of University Bookstore" drawn on his account in Verity Bank to pay for his textbooks. The bookstore deposits the check in its account in West Bank. Like most checks, this check is

Quinn signs a check "pay to the order of Ronda" drawn on Quinn's account in Suburban Bank. Quinn has $400 in his account but the amount of the check is $500, which the bank pays. This is