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Exam 24: Banking in the Digital Age

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Question 1

Multiple Choice

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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 creates

A) a dishonored check.
B) an overdraft.
C) an oversight.
D) a stale check.

E) None of the above
F) A) and B)

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verified

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Question 2

Multiple Choice

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State Bank agrees to accept a check by setting aside sufficient funds to cover the amount. This check is considered

A) cashed.
B) certified.
C) deposited.
D) a provisional credit.

E) All of the above
F) C) and D)

Correct Answer

verified

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Question 3

True/False

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No one who takes an instrument with a forged indorsement can become a holder.

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. First bank may do all of the following except

Under the UCC, a bank is a person engaged in the business of banking.

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

Banks that do not exchange checks electronically are required to accept substitute checks in the same way that they accept the original checks.

A bank and its customers have a duty to act in good faith with one another.

Fact Pattern 24-1 Ruth takes her car to Service Center, which repairs the car and bills her for $500. She writes out a check drawn on Tempo Bank, but later, believing that Service Center did not fix the car properly, issues a stop-payment order. Refer to Fact Pattern 24-1. Tempo

The contractual rights and duties of the bank and the customer depend on the nature of the transaction.

When a bank wrongfully dishonors a check, it has no liability to the customer.

Financial institutions that exchange digital images of checks do not have to send the original paper checks.

Discovery of forgeries and notice to the bank must take place within four years from the date that the statement was made available for inspection.

Tomas writes a check for $1,000 drawn on United Bank and presents it to Viola. Viola presents the check for payment to United Bank, which dishonors it because of insufficient funds . The party most likely liable to Viola is

Misty's debit card, issued by National United Bank, is stolen and used without her permission. She tells the bank within thirty days. She may be required to pay no more than

Ridgeline Bank creates a paper reproduction of customer Sophie's check with the statement "This is a legal copy of your check. You can use it in the same way you would use the original check." This is

Checks received after a certain time can be deferred for posting until the next day.

Curt issues a check payable to Discount Mart. Ethel, Discount's cashier, forges the store's indorsement and deposits the check in her bank account. Curt's bank, Farmers Bank, pays the check. Curt can recover from

When processing a check, Sterling Bank encodes information, such as the amount of the check, on the item. Sterling thereby warrants to any subsequent bank or payor

Fact Pattern 24-1 Ruth takes her car to Service Center, which repairs the car and bills her for $500. She writes out a check drawn on Tempo Bank, but later, believing that Service Center did not fix the car properly, issues a stop-payment order. Refer to Fact Pattern 24-1. If Tempo pays the check, the bank