Question 1

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 it is the financial institution responsible for paying the funds to the payee, Olive, as indicated on the check that was signed by Marta, the drawer.

Question 2

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

Accepted Answer

The bank is liable to Dana because it failed to honor a check despite sufficient funds being available, breaching its duty to its customer, Dana.

Question 3

Faye forges Greta's signature on a check "payable to the order of Faye" 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 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 generally responsible for verifying the authenticity of signatures on checks. If it pays a check with a forged signature, it typically must recredit the account of the person whose signature was forged.

Question 4

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 dishonors 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 liable to Viola in a civil suit because he is the one who wrote and presented the check to her. Unified Bank may also have some liability in failing to honor the check, but Viola's immediate recourse is against Tomas. There is no indication of any criminal wrongdoing by Tomas in this scenario.

Question 5

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) ​only Riley.
B) ​both Riley 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 6

Dick signs a check "pay to the order of Sally" drawn on Dick's account in Suburban Bank. Dick 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, where the bank pays out more than the available balance in the account, resulting in a negative balance.

Question 7

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) ​a nonnegotiable instrument.
C) ​a type 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 8

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

A cashier's check is a check drawn on the bank's own funds and signed by a cashier or bank teller. In this scenario, Elmore is paying the bank to draw a check on itself, which matches the definition of a cashier's check.

Question 9

Dhani signs a check "pay to the order of Eton" drawn on Dhani's account in Fidelity Guaranty 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

The check is considered stale because it is presented for payment more than six months after it was dated.

Question 10

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

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

Question 11

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 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 Dalton what he would prefer.

Accepted Answer

The usual banking practice for a check presented more than six months after its date is to consult the drawer (Emma) to confirm whether the check should still be honored.

Question 12

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) ​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 Ivan claims an interest in the account.

Accepted Answer

The bank may pay the check since they had no knowledge of the account holder's death at the time of the transaction. The bank is only obligated to refuse payment if they have actual knowledge of the account holder's death or if they receive proper notice of the death before paying the check. Therefore, Ivan can legally receive the $400 check.

Question 13

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

Accepted Answer

The answer of Boris can write checks on his account...

Question 14

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 union pays 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

Under the Uniform Commercial Code, a bank or credit union generally has the right to charge the account of the person who wrote the check (Joni) for the full amount of the check, even if it has been several months since the check was written. Therefore, the credit union can charge Joni's account for $500.

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

The bank is not obligated to recredit Shane's account since he did not renew the stop payment order, and the bank cleared the check when presented for payment. The responsibility to resolve the issue with the defective device and payment for it lies with Shane and Farm Supply Store.

Question 16

Bea 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, Bea may be prosecuted for​
A) ​forgery.
B) ​fraud.
C) ​negligence.
D) ​none of the choices.

Accepted Answer

If Bea writes a check that is not backed by sufficient funds, it is considered check fraud, which is a criminal offense that could result in prosecution. Writing a bad check can also result in civil penalties and damages. Forgery refers to the act of falsifying a signature, which is not the case in this scenario. Negligence may be a factor if Bea did not exercise reasonable care in managing her finances, but it is not the primary issue at hand.

Question 17

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

An oral stop payment order is valid for fourteen days unless confirmed in writing, which would then extend it to six months.

Question 18

Fact Pattern 18-1
Kelly takes her car to Auto Repair Service, which repairs the car and bills Kelly for $500. She writes out a check drawn on Choice Bank, but later, believing that Auto Repair did not fix the car properly, issues a stop-payment order.
-Refer to Fact Pattern 18-1.Choice​
A) ​is liable to Auto Repair for the amount of the check.
B) ​must stop payment if Choice has a reasonable time to act.
C) ​need not follow Kelly's order because it was issued after the check.
D) ​need not follow Kelly's order unless the check was certified.

Accepted Answer

Choice Bank must stop payment if Kelly's stop-payment order is received in time to give the bank a reasonable opportunity to act on it before the check is processed.

Question 19

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 void, and therefore, Brandy's act of forging Caleb's signature on a check is not effective. The bank will not honor the check, and Caleb will not be held responsible for the payment.

Question 20

Fact Pattern 18-1
Kelly takes her car to Auto Repair Service, which repairs the car and bills Kelly for $500. She writes out a check drawn on Choice Bank, but later, believing that Auto Repair did not fix the car properly, issues a stop-payment order.
-Refer to Fact Pattern 18-1.If Choice pays the check, the bank
A) ​can sue Kelly for a wrongful stop-payment order.
B) ​can sue Auto Repair for breach of contract.
C) ​is liable to Auto Repair for the time and trouble to return the payment.
D) ​is liable for Kelly's loss due to the wrongful payment.

Accepted Answer

If Choice Bank pays the check despite the stop-payment order, it is liable to Kelly for any loss she incurs due to the wrongful payment.

Quiz 18: Banking in the Digital Age

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

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

Faye forges Greta's signature on a check "payable to the order of Faye" 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 dishonors it. The party most likely liable to Viola is​

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​

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

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​

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​

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

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​

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 Bank. If the bank follows the usual banking practice in such a case, it will​

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​

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

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 union pays the check in good faith without consulting Joni. The credit union​

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​

Bea 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, Bea may be prosecuted for​

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​

Fact Pattern 18-1 Kelly takes her car to Auto Repair Service, which repairs the car and bills Kelly for $500. She writes out a check drawn on Choice Bank, but later, believing that Auto Repair did not fix the car properly, issues a stop-payment order. -Refer to Fact Pattern 18-1.Choice​

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​

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

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

Faye forges Greta's signature on a check "payable to the order of Faye" 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 dishonors it. The party most likely liable to Viola is

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

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

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

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

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

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

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 Bank. If the bank follows the usual banking practice in such a case, it will

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

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

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 union pays the check in good faith without consulting Joni. The credit union

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

Bea 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, Bea may be prosecuted for

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

Fact Pattern 18-1 Kelly takes her car to Auto Repair Service, which repairs the car and bills Kelly for $500. She writes out a check drawn on Choice Bank, but later, believing that Auto Repair did not fix the car properly, issues a stop-payment order. -Refer to Fact Pattern 18-1.Choice

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