Question 1

Brandy forges Caleb's signature on a check "payable to the order of Brandy" drawn on Caleb's account in Downtown Bank. Caleb's forged signature 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 not effective. Brandy has committed a crime by forging Caleb's signature on his check, and the check will not be honored by the bank. Even if Downtown Bank does not catch the forgery initially, Caleb can dispute the transaction and have the funds reimbursed.

Question 2

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

Accepted Answer

Under the Uniform Commercial Code (UCC), specifically section 3-404, a bank is not responsible for determining whether the drawer (Gary in this case) is alive or dead at the time a check is presented for payment. As long as the check is properly endorsed by the payee (Ivan in this case), the bank may pay the check. Therefore, the bank may pay the check even though Gary has died.

Question 3

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

Accepted Answer

A check is considered stale if it is presented for payment six months or more after the date on the check. In this case, Eton presented the check to the bank more than seven months after it was dated, making it a stale check. The bank may still honor the check, but it is not obligated to do so.

Question 4

Cleo writes a check for $100 drawn on Debit & Credit Bank and presents it to Elegant Jewelers for payment. If the check is not backed by sufficient funds,Cleo may be prosecuted for
A)forgery.
B)fraud.
C)negligence.
D)nothing.

Accepted Answer

Writing a check without sufficient funds, also known as a "bounced check" or "hot check," is considered fraud and may result in legal consequences.

Question 5

Travis signs a check "pay to the order of Umberto" drawn on Travis's account in Valley Bank. Travis 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)an oversight.
D)a stale check.

Accepted Answer

This is an overdraft, as Travis has written a check for more money than is currently in his account. The bank has paid the check, but Travis will be responsible for paying the bank back the $100 difference.

Question 6

Gillian writes a check to Harris as payment for a video game player but soon discovers the player is broken. She 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)one year.
C)six days.
D)six months.

Accepted Answer

An oral stop payment order is valid for fourteen days unless confirmed in writing.

Question 7

Riley pays State Bank $500 plus a service fee to draw a check on itself payable to Torque Plumbing. The party that is responsible for paying the check is
A)onlyRiley.
B)bothRiley and State Bank.
C)only State Bank.
D)none of the choices.

Accepted Answer

The responsibility of paying the check lies solely with State Bank since Riley paid them the amount along with a service fee to draw the check on itself payable to Torque Plumbing. Riley has already paid State Bank for this purpose, so the liability falls on the bank to ensure payment.

Question 8

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

Accepted Answer

Finance Bank will have to recredit Daisy's account because it is the bank's responsibility to verify the authenticity of endorsements on checks drawn on its accounts. When the bank pays out on a forged endorsement, it typically must bear the loss and recredit the account of the person who wrote the check, in this case, Daisy.

Question 9

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

Accepted Answer

Neighbors Bank is the drawee because they are the financial institution that will be responsible for paying the funds from Marta's account to Olive as the payee. Marta is the drawer because she is authorizing the payment from her account.

Question 10

Foster forges Greta's signature on a check "payable to the order of Foster" drawn on Greta's account in Hearthside 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 Hearthside's customers.
C)Greta will be liable for the amount.
D)Hearthside will have to recredit Greta's account.

Accepted Answer

Hearthside Bank will have to recredit Greta's account because the bank is responsible for verifying the authenticity of signatures on checks it processes. If a signature is forged, the bank is liable for the loss.

Question 11

Tomas writes a check for $1,000 drawn on Unified Bank and presents it to Viola. Viola presents the check for payment to Unified Bank,which dis-honors it. The party most likely liable to Viola is
A)Tomas in a civil suit.
B)Tomas in a criminal prosecution.
C)Unity Bank in a civil suit.
D)none of the choices.

Accepted Answer

Tomas is the party responsible for the payment on the check and is therefore liable for the amount owed to Viola. Viola can pursue civil action against Tomas to recover the funds. The bank's refusal to honor the check does not absolve Tomas of his responsibility to pay.

Question 12

O'Shea issues a check drawn on Prime Bank to Quality Equipment Supply to pay for a backhoe. Later,O'Shea discovers a defect in the backhoe and orders the bank to stop payment on the check. O'Shea does not renew the order,and the bank clears the check eight months later. The bank
A)must recredit O'Shea's account.
B)must obtain funds from Quality to cover the amount of the check.
C)must substitute acceptable goods.
D)need not recredit O'Shea's account.

Accepted Answer

Once a check has been cleared by the bank and the funds have been transferred, the bank is not responsible for stopping payment or recrediting the payer's account. In this case, O'Shea did not renew the stop payment order, therefore the bank cleared the check and transferred the funds to Quality. The responsibility to resolve the issue with the defect in the backhoe lies between O'Shea and Quality, and the bank is not involved.

Question 13

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

Accepted Answer

The credit union can charge Joni's account for $500 because Joni issued an uncertified check, which means that the check is not guaranteed by the bank, and the credit union paid it in good faith. Therefore, Joni is responsible for the full amount of the check.

Question 14

Brendan signs a check "pay to the order of City College Bookstore" drawn on his account in Delta Bank to pay for his current semester's textbooks. The bookstore deposits the check in its account in Eagle Bank. Like most checks,this check is
A)a one-party instrument.
B)anonnegotiable instrument.
C)atype of draft.
D)not a substitute for cash.

Accepted Answer

The check is a type of draft, which is a written order to pay a certain amount of money to a specific person or entity. It can be negotiated or transferred by endorsement, in this case from Brendan to City College Bookstore.

Question 15

Simon signs a check "pay to the order of Tilly" drawn on Simon's account in United Bank. Vela forges Tilly's indorsement,Western Bank cashes the check,and Vela disappears. United pays Western and debits Simon's account. Most likely,the ultimate loss will fall on
A)Simon.
B)Trudy.
C)United Bank.
D)Western Bank.

Accepted Answer

The answer of Simon signs a check "pay to the...

Question 16

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

Accepted Answer

Banks typically consult the account holder (the drawer) when a check is presented for payment more than six months after its date, as it is considered a "stale" check.

Question 17

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

Accepted Answer

The answer of Ervin signs a check "pay to the...

Question 18

Homer can write checks on his account at InterCity Bank. Jemma steals the checks,forges Homer's signature,and cashes the checks at InterCity. The bank is excused from any liability if,after receipt of the first forged check,Homer fails to report the forgeries within
A)fourteen days.
B)one year.
C)six days.
D)six months.

Accepted Answer

Under the Uniform Commercial Code (UCC), a bank customer must report unauthorized signatures or alterations on their account statement within one year from when the statement was made available to them. If they fail to do so, the bank is typically excused from liability for the forged checks.

Question 19

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

Accepted Answer

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

Question 20

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

Accepted Answer

This is a cashier's check as Elmore paid the bank to draw a check on itself, making it guaranteed funds for Go Delivery Service.

Quiz 24: Banking in the Digital Age

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

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

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

Cleo writes a check for $100 drawn on Debit & Credit Bank and presents it to Elegant Jewelers for payment. If the check is not backed by sufficient funds,Cleo may be prosecuted for

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

Gillian writes a check to Harris as payment for a video game player but soon discovers the player is broken. She goes to the drawee bank and orally authorizes Ilene,a bank officer,to stop payment on the check. This order is valid for

Riley pays State Bank $500 plus a service fee to draw a check on itself payable to Torque Plumbing. The party that is responsible for paying the check is

Daisy signs a check "pay to the order of Ewan" drawn on Daisy's account in Finance Bank. Graham forges Ewan's indorsement. FinanceBank pays the check. Most likely

Marta has a checking account with Neighbors Bank. Marta signs a check "payable to Olive" drawn on Marta's account. Neighbors Bank is

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

Tomas writes a check for $1,000 drawn on Unified Bank and presents it to Viola. Viola presents the check for payment to Unified Bank,which dis-honors it. The party most likely liable to Viola is

O'Shea issues a check drawn on Prime Bank to Quality Equipment Supply to pay for a backhoe. Later,O'Shea discovers a defect in the backhoe and orders the bank to stop payment on the check. O'Shea does not renew the order,and the bank clears the check eight months later. The bank

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

Brendan signs a check "pay to the order of City College Bookstore" drawn on his account in Delta Bank to pay for his current semester's textbooks. The bookstore deposits the check in its account in Eagle Bank. Like most checks,this check is

Simon signs a check "pay to the order of Tilly" drawn on Simon's account in United Bank. Vela forges Tilly's indorsement,Western Bank cashes the check,and Vela disappears. United pays Western and debits Simon's account. Most likely,the ultimate loss will fall on

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

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

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

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

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