Exam 25: Banking System and Electronic Financial Transactions

What is the significance of bank statements to an electronic fund transfer customer?

A checking account customer owes a duty to examine the monthly statements of account promptly and with reasonable care to determine whether any payment was not authorized because of alteration of a check or a forged signature.

Article 4A of the Uniform Commercial Code (UCC) applies only to commercial electronic funds transfers.

The drawer's failure to report a forged or altered check to the bank within six months of receiving the bank statement and canceled checks containing it relieves the bank of any liability for paying the instrument.

Francis Jeffers purchased a cashier's check in the amount of $5,000 from Northern Star Bank. The check was made payable to Kyle Naughton and was delivered to him. Twelve months later, the Northern Star Bank branch manager informed Jeffers that the cashier's check was still outstanding. Jeffers subsequently signed a form requesting that payment be stopped and a replacement check be issued. Northern Star Bank issued a replacement check to Jeffers. Eight months later, Naughton deposited the original cashier's check in his bank, which was paid by Northern Star Bank. Northern Star Bank requested that Jeffers repay the bank $5,000. When he refused, Northern Star Bank sued Jeffers to recover this amount and the court awarded Northern Star Bank damages amounting to $5,500. In which of the following circumstances, if true, would the court have ruled in Jeffers' favor?

The check collection process, which may involve multiple banks, is governed by Revised Article 3 of the UCC.

Jill Scott is an accountant with Cameron and Associates, a law firm in downtown Seattle. The firm maintains a checking account with Southern Rock Bank for its operating expenses. On the 10th of every month, Jill gets an inventory report from the office manager listing the office supplies that are needed. Jill places the appropriate orders with Office Depot and writes them a check against the office's checking account. Who is the drawee in this banking transaction?

Article 4A of the Uniform Commercial Code governs commercial and consumer wire transfers.

Checks are the most common form of negotiable instruments used in the United States.

What are altered checks? What are the actions that a bank can take when it encounters a case of check alteration?

The Pittsburgh Peelers are a professional soccer team playing in Major League Soccer. They recently approached Darth Water, a leading sports-drink manufacturer, to sponsor their team for the upcoming season. Darth Water agrees to sponsor the team for an amount of $1 million, to be paid in installments over the course of the season. Darth Water instructs its bank, Orange County Bank, to wire the funds to Pittsburgh Peelers' bank, the Jersey Shore Bank. Which of the following parties is the originator of the wire transfer in the above case?

The drawee is the party to whom a check is written.

The deferred posting rule allows banks to fix an afternoon hour of 2:00 P.M. or later as a cutoff hour for the purpose of processing checks and deposits.

Mrs. Dawson wrote a check to Kevin for $50 on New Year's Day for clearing the snow from her driveway on Christmas Eve. However, when Kevin tries to cash the check at Mrs. Dawson's bank, he is told that the check is stale. Which of the following is the most likely reason for Mrs. Dawson's check being dishonored by the bank?

In which of the following cases is an overdraft created in a drawer's account?

The bank where the payee or holder of a check has an account is known as the ________.

A check that has been outstanding for more than three months is considered stale, and the bank is under no obligation to pay it.

A person can purchase a(n) ________ from a bank by paying the bank the amount of the check plus a fee for issuing the check.

When a bank pays the holder of a properly drawn check, it is said to have ________ the check.

If the drawer does not have enough money in his or her account when a properly payable check is presented for payment, the payer bank is obligated to honor the check and create an overdraft in the drawer's account.