George's Wholesaling agrees to purchase 1000 pounds of bananas from Chickadee Exports at 39 cents per pound.George's does not have the money for the bananas now,but promises to pay in two months.Chickadee Exports wants George's business but needs the money now.Chickadee (as drawer)prepares an instrument ordering George's (as drawee)to pay $390 to Primary Bank (the payee).This is an example of a:

Question

Quizplus · Accepted Answer

This is a trade acceptance because it is an instrument that orders the drawee (George's Wholesaling) to pay a certain amount of money to the payee (Primary Bank) at a future date. This instrument is created to fulfill the need for Chickadee Exports to get the money now, but still allow George's Wholesaling to delay payment for two months. A check and a promissory note are similar instruments, but they do not involve a three-party transaction like a trade acceptance does.

George's Wholesaling Agrees to Purchase 1000 Pounds of Bananas from Chickadee