Question 1

If Margie makes out a check for $27.50 when she has only $10 in her account,her bank may:

Accepted Answer

A) refuse to pay the check. 
B) pay the check. 
C) bill Margie for $17.50 and a service charge. 
D) Any of the above. 
A) refuse to pay the check. 
B) pay the check. 
C) bill Margie for $17.50 and a service charge. 
D) Any of the above. D

Question 2

Emma calls her bank to issue an oral stop payment order on a check on March 1st.She then leaves town for two weeks to visit her mother.When she returns,she goes to the bank to sign a written stop payment order,but finds the bank has already paid the check.What recourse does she have?

Accepted Answer

She may not have any recourse if she ordered the stop payment after the check had cleared the bank,or if it was paid more than 14 days after she ordered the stop payment orally.If the stop payment order was received in time for the bank to act,and if the check was paid within 14 days of March 1st,the bank must reimburse Emma for the amount she can establish as a loss as a result of the bank's payment over her stop payment order.

Question 3

If a depositor in First Bank takes a check written on Valley Bank to First Bank to deposit,it will not normally be credited to his account until collected from the payor bank.

Accepted Answer

A) True 
 B)False  False

Question 4

Sylvia draws a check on ABC Bank payable "to the order of Ann Smith." Ann indorses it and deposits it in her account at First Bank.First Bank is a:

Accepted Answer

A) drawee bank. 
B) payee bank. 
C) depositary bank. 
D) payor bank. 
A) drawee bank. 
B) payee bank. 
C) depositary bank. 
D) payor bank.

Question 5

Theresa has just started working for Citizens Bank as a teller.A man comes into the bank with a $100 check that is 8 months old.She goes to the manager to ask whether she should pay it.If you were the manager,what would you advise her?

Accepted Answer

Banks are not obligated to pay a check m

Question 6

Banks like electronic funds transfers because they eliminate the float time that a drawer enjoys on a checking account and the paperwork involved in processing checks.

Accepted Answer

A) True 
 B)False

Question 7

A written stop payment order is effective indefinitely.

Accepted Answer

A) True 
 B)False

Question 8

Match each statement with the correct term below.
-real defenses

Accepted Answer

A) An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time. 
B) A specialized form of draft; an order to pay money drawn on a bank and payable on demand. 
C) Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money. 
D) Paper that is payable to the possessor of an instrument; a check that is made payable to cash or that is indorsed in blank. 
E) A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.
F)A signature on an instrument that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.
G)Issuer of a promissory note or Cd.
H)A written acknowledgement by a bank of the receipt of money that it promises to repay, with interest at a stated rate; a specialized form of promise to pay money that is given by a bank.
I)A person or organization to whom a draft is directed, and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.
J)Issuer of a check or draft.
K)A signature on an instrument that attempts to limit the rights of the indorsee in some fashion.
L)Signature that identifies an indorsee to be paid; makes the instrument order paper.
M)Oral, written, or electronic instruction to a receiving bank to pay or to cause another bank to pay a fixed amount of money to a beneficiary.
N)Contractual protections from liability good against holders but not against holders in due course.
O)An instrument involving two parties, one of whom promises to pay to the order of the second a stated sum of money either on demand or at a stated future date.
P)Person who signs an instrument to lend her credit to another party to the instrument.
Q)The transferee of a holder in due course succeeds to the rights of a holder in due course even if the transferee does not qualify for holder in due course status.
R)The first bank into which an item is deposited for collection.
S)Demand for payment or acceptance of an instrument.
T)Acceptance of a check by a bank.
U)Protections from liability good against all holders, including holders in due course.
V)Piece of paper, which may contain an indorsement, that is affixed to an instrument. 
A) An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time. 
B) A specialized form of draft; an order to pay money drawn on a bank and payable on demand. 
C) Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money. 
D) Paper that is payable to the possessor of an instrument; a check that is made payable to cash or that is indorsed in blank. 
E) A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.
F)A signature on an instrument that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.
G)Issuer of a promissory note or Cd.
H)A written acknowledgement by a bank of the receipt of money that it promises to repay, with interest at a stated rate; a specialized form of promise to pay money that is given by a bank.
I)A person or organization to whom a draft is directed, and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.
J)Issuer of a check or draft.
K)A signature on an instrument that attempts to limit the rights of the indorsee in some fashion.
L)Signature that identifies an indorsee to be paid; makes the instrument order paper.
M)Oral, written, or electronic instruction to a receiving bank to pay or to cause another bank to pay a fixed amount of money to a beneficiary.
N)Contractual protections from liability good against holders but not against holders in due course.
O)An instrument involving two parties, one of whom promises to pay to the order of the second a stated sum of money either on demand or at a stated future date.
P)Person who signs an instrument to lend her credit to another party to the instrument.
Q)The transferee of a holder in due course succeeds to the rights of a holder in due course even if the transferee does not qualify for holder in due course status.
R)The first bank into which an item is deposited for collection.
S)Demand for payment or acceptance of an instrument.
T)Acceptance of a check by a bank.
U)Protections from liability good against all holders, including holders in due course.
V)Piece of paper, which may contain an indorsement, that is affixed to an instrument.

Question 9

Sue deposits in her account at First Bank a $50 check drawn on Valley Bank.First Bank transfers the check to Second Bank,which in turn forwards it to Valley Bank,which pays the item.Valley Bank is the:

Accepted Answer

A) payor bank. 
B) drawee bank. 
C) collecting bank. 
D) Two of the above, (a) and (b), are correct. 
A) payor bank. 
B) drawee bank. 
C) collecting bank. 
D) Two of the above, (a) and (b), are correct.

Question 10

On April 6,Ellen sends a check out to a magazine publisher and then discovers she has already paid for the subscription.She calls her bank and orders that the bank not make payment.That order will be good until:

Accepted Answer

A) April 13. 
B) October 6. 
C) April 13 if confirmed in writing. 
D) October 6 if confirmed in writing. 
A) April 13. 
B) October 6. 
C) April 13 if confirmed in writing. 
D) October 6 if confirmed in writing.

Question 11

For how long is a written stop payment order valid?

Accepted Answer

A) One month. 
B) Six months. 
C) One year. 
D) Indefinitely. 
A) One month. 
B) Six months. 
C) One year. 
D) Indefinitely.

Question 12

Match each statement with the correct term below.
-bearer paper

Accepted Answer

A) An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time. 
B) A specialized form of draft; an order to pay money drawn on a bank and payable on demand. 
C) Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money. 
D) Paper that is payable to the possessor of an instrument; a check that is made payable to cash or that is indorsed in blank. 
E) A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.
F)A signature on an instrument that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.
G)Issuer of a promissory note or Cd.
H)A written acknowledgement by a bank of the receipt of money that it promises to repay, with interest at a stated rate; a specialized form of promise to pay money that is given by a bank.
I)A person or organization to whom a draft is directed, and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.
J)Issuer of a check or draft.
K)A signature on an instrument that attempts to limit the rights of the indorsee in some fashion.
L)Signature that identifies an indorsee to be paid; makes the instrument order paper.
M)Oral, written, or electronic instruction to a receiving bank to pay or to cause another bank to pay a fixed amount of money to a beneficiary.
N)Contractual protections from liability good against holders but not against holders in due course.
O)An instrument involving two parties, one of whom promises to pay to the order of the second a stated sum of money either on demand or at a stated future date.
P)Person who signs an instrument to lend her credit to another party to the instrument.
Q)The transferee of a holder in due course succeeds to the rights of a holder in due course even if the transferee does not qualify for holder in due course status.
R)The first bank into which an item is deposited for collection.
S)Demand for payment or acceptance of an instrument.
T)Acceptance of a check by a bank.
U)Protections from liability good against all holders, including holders in due course.
V)Piece of paper, which may contain an indorsement, that is affixed to an instrument. 
A) An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time. 
B) A specialized form of draft; an order to pay money drawn on a bank and payable on demand. 
C) Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money. 
D) Paper that is payable to the possessor of an instrument; a check that is made payable to cash or that is indorsed in blank. 
E) A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.
F)A signature on an instrument that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.
G)Issuer of a promissory note or Cd.
H)A written acknowledgement by a bank of the receipt of money that it promises to repay, with interest at a stated rate; a specialized form of promise to pay money that is given by a bank.
I)A person or organization to whom a draft is directed, and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.
J)Issuer of a check or draft.
K)A signature on an instrument that attempts to limit the rights of the indorsee in some fashion.
L)Signature that identifies an indorsee to be paid; makes the instrument order paper.
M)Oral, written, or electronic instruction to a receiving bank to pay or to cause another bank to pay a fixed amount of money to a beneficiary.
N)Contractual protections from liability good against holders but not against holders in due course.
O)An instrument involving two parties, one of whom promises to pay to the order of the second a stated sum of money either on demand or at a stated future date.
P)Person who signs an instrument to lend her credit to another party to the instrument.
Q)The transferee of a holder in due course succeeds to the rights of a holder in due course even if the transferee does not qualify for holder in due course status.
R)The first bank into which an item is deposited for collection.
S)Demand for payment or acceptance of an instrument.
T)Acceptance of a check by a bank.
U)Protections from liability good against all holders, including holders in due course.
V)Piece of paper, which may contain an indorsement, that is affixed to an instrument.

Question 13

Any unauthorized indorsement must be asserted within one year under the UCC's statute of limitations provision.

Accepted Answer

A) True 
 B)False

Question 14

Under the Competitive Equality Banking Act,a nonlocal check must clear in no more than four intervening business days.

Accepted Answer

A) True 
 B)False

Question 15

Match each statement with the correct term below.
-draft

Accepted Answer

A) An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time. 
B) A specialized form of draft; an order to pay money drawn on a bank and payable on demand. 
C) Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money. 
D) Paper that is payable to the possessor of an instrument; a check that is made payable to cash or that is indorsed in blank. 
E) A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.
F)A signature on an instrument that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.
G)Issuer of a promissory note or Cd.
H)A written acknowledgement by a bank of the receipt of money that it promises to repay, with interest at a stated rate; a specialized form of promise to pay money that is given by a bank.
I)A person or organization to whom a draft is directed, and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.
J)Issuer of a check or draft.
K)A signature on an instrument that attempts to limit the rights of the indorsee in some fashion.
L)Signature that identifies an indorsee to be paid; makes the instrument order paper.
M)Oral, written, or electronic instruction to a receiving bank to pay or to cause another bank to pay a fixed amount of money to a beneficiary.
N)Contractual protections from liability good against holders but not against holders in due course.
O)An instrument involving two parties, one of whom promises to pay to the order of the second a stated sum of money either on demand or at a stated future date.
P)Person who signs an instrument to lend her credit to another party to the instrument.
Q)The transferee of a holder in due course succeeds to the rights of a holder in due course even if the transferee does not qualify for holder in due course status.
R)The first bank into which an item is deposited for collection.
S)Demand for payment or acceptance of an instrument.
T)Acceptance of a check by a bank.
U)Protections from liability good against all holders, including holders in due course.
V)Piece of paper, which may contain an indorsement, that is affixed to an instrument. 
A) An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time. 
B) A specialized form of draft; an order to pay money drawn on a bank and payable on demand. 
C) Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money. 
D) Paper that is payable to the possessor of an instrument; a check that is made payable to cash or that is indorsed in blank. 
E) A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.
F)A signature on an instrument that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.
G)Issuer of a promissory note or Cd.
H)A written acknowledgement by a bank of the receipt of money that it promises to repay, with interest at a stated rate; a specialized form of promise to pay money that is given by a bank.
I)A person or organization to whom a draft is directed, and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.
J)Issuer of a check or draft.
K)A signature on an instrument that attempts to limit the rights of the indorsee in some fashion.
L)Signature that identifies an indorsee to be paid; makes the instrument order paper.
M)Oral, written, or electronic instruction to a receiving bank to pay or to cause another bank to pay a fixed amount of money to a beneficiary.
N)Contractual protections from liability good against holders but not against holders in due course.
O)An instrument involving two parties, one of whom promises to pay to the order of the second a stated sum of money either on demand or at a stated future date.
P)Person who signs an instrument to lend her credit to another party to the instrument.
Q)The transferee of a holder in due course succeeds to the rights of a holder in due course even if the transferee does not qualify for holder in due course status.
R)The first bank into which an item is deposited for collection.
S)Demand for payment or acceptance of an instrument.
T)Acceptance of a check by a bank.
U)Protections from liability good against all holders, including holders in due course.
V)Piece of paper, which may contain an indorsement, that is affixed to an instrument.

Question 16

Which of the following is NOT a duty of a collecting bank in the collection process?

Accepted Answer

A) Duty of care. 
B) Duty to act in a timely manner. 
C) Duty to honor a valid stop payment order. 
D) Duty to honor a restrictive endorsement. 
A) Duty of care. 
B) Duty to act in a timely manner. 
C) Duty to honor a valid stop payment order. 
D) Duty to honor a restrictive endorsement.

Question 17

If a bank receives a check on Tuesday,it must take proper action,such as forwarding or presenting it,by midnight of Wednesday.

Accepted Answer

A) True 
 B)False

Question 18

Helen deposits a $50 check in her account at First Bank at 4:00 on Friday.The bank is closed on Saturday and Sunday,but opens again on Monday.The midnight deadline for First Bank would be:

Accepted Answer

A) Midnight Saturday. 
B) Midnight Sunday. 
C) Midnight Monday. 
D) Midnight Tuesday. 
A) Midnight Saturday. 
B) Midnight Sunday. 
C) Midnight Monday. 
D) Midnight Tuesday.

Question 19

Caryn deposits a check in her bank at 2:30 on Monday.The bank may,under the Code,treat the check as having been deposited on Tuesday for purposes of meeting the midnight deadline rule.

Accepted Answer

A) True 
 B)False

Question 20

If Ben Stewart has a checking account at First Bank:

Accepted Answer

A) the relationship between Ben and his bank is based primarily on their contractual agreement. 
B) First Bank is a creditor and Ben is a debtor. 
C) Ben is an agent of First Bank. 
D) All of the above. 
A) the relationship between Ben and his bank is based primarily on their contractual agreement. 
B) First Bank is a creditor and Ben is a debtor. 
C) Ben is an agent of First Bank. 
D) All of the above.

Exam 27: Bank Deposits, Collections, and Funds Transfers

If Margie makes out a check for $27.50 when she has only $10 in her account,her bank may:

Emma calls her bank to issue an oral stop payment order on a check on March 1st.She then leaves town for two weeks to visit her mother.When she returns,she goes to the bank to sign a written stop payment order,but finds the bank has already paid the check.What recourse does she have?

If a depositor in First Bank takes a check written on Valley Bank to First Bank to deposit,it will not normally be credited to his account until collected from the payor bank.

Sylvia draws a check on ABC Bank payable "to the order of Ann Smith." Ann indorses it and deposits it in her account at First Bank.First Bank is a:

Theresa has just started working for Citizens Bank as a teller.A man comes into the bank with a $100 check that is 8 months old.She goes to the manager to ask whether she should pay it.If you were the manager,what would you advise her?

Banks like electronic funds transfers because they eliminate the float time that a drawer enjoys on a checking account and the paperwork involved in processing checks.

A written stop payment order is effective indefinitely.

Match each statement with the correct term below. -real defenses

Sue deposits in her account at First Bank a $50 check drawn on Valley Bank.First Bank transfers the check to Second Bank,which in turn forwards it to Valley Bank,which pays the item.Valley Bank is the:

On April 6,Ellen sends a check out to a magazine publisher and then discovers she has already paid for the subscription.She calls her bank and orders that the bank not make payment.That order will be good until:

For how long is a written stop payment order valid?

Match each statement with the correct term below. -bearer paper

Any unauthorized indorsement must be asserted within one year under the UCC's statute of limitations provision.

Under the Competitive Equality Banking Act,a nonlocal check must clear in no more than four intervening business days.

Match each statement with the correct term below. -draft

Which of the following is NOT a duty of a collecting bank in the collection process?

If a bank receives a check on Tuesday,it must take proper action,such as forwarding or presenting it,by midnight of Wednesday.

Helen deposits a $50 check in her account at First Bank at 4:00 on Friday.The bank is closed on Saturday and Sunday,but opens again on Monday.The midnight deadline for First Bank would be:

Caryn deposits a check in her bank at 2:30 on Monday.The bank may,under the Code,treat the check as having been deposited on Tuesday for purposes of meeting the midnight deadline rule.

If Ben Stewart has a checking account at First Bank:

Introduction to Law

Business Ethics

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remedies

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Relationship of Principal and Agent

Relationship With Third Parties

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature and Formation of Corporations

Financial Structure of Corporations

Management Structure of Corporations

Fundamental Changes of Corporations

Secured Transactions and Suretyship

Bankruptcy

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

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International Business Law

Introduction to Property, property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

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