1. To obtain his business license, Alan writes a check to the appropriate state agency. Alan is
a. the drawee.
b. the drawer.
c. the indorser.
d. the payee.
Answer A
____ 2. Alpha Company issues a trade acceptance with itself and Beta Company as parties. A trade acceptance is
a. a draft.
b. an order to accept delivery of money.
c. a promise to accept delivery of goods.
d. a promise to deliver goods.
Answer A
____ 3. Doug writes a check for $100 payable to Eve on his account at First State Bank. The bank is
a. the bearer.
b. the drawee.
c. the drawer.
d. the holder.
Answer C
____ 4. To pay for improvements to Diners Cafe, Earl executes a negotiable instrument in favor of First County Bank. They are the only parties to the instrument. A negotiable instrument that has only two parties is
a. a bank draft.
b. a check.
c. an indorsement.
d. a promissory note.
____ 5. Finest Business Company issues an instrument in favor of General Supplies, Inc. For the instrument to be negotiable, it need not
a. be an unconditional promise or order to pay.
b. be payable on demand or at a specific time.
c. be signed by Finest Business Company.
d. recite the consideration given in exchange for a promise to pay.
____ 6. Ellen owes $6,000 in unpaid taxes. On the back of an old shirt, she executes an instrument for that amount that otherwise meets the requirements for negotiability. This instrument is likely
a. negotiable.
b. nonnegotiable, because an instrument must be on paper.
c. nonnegotiable, because a shirt is not sufficiently permanent.
d. nonnegotiable, because the government does not appreciate it.
____ 7. Jim owes $5,000 in unpaid taxes. On the flank of his quarter horse, he executes an instrument for that amount that otherwise meets the requirements for negotiability. This instrument is likely
a. negotiable.
b. nonnegotiable, because an instrument must be on paper.
c. nonnegotiable, because a quarter horse is not freely transferable.
d. nonnegotiable, because the government does not appreciate it.
____ 8. Don, the chief executive officer of Epsilon Products, Inc., signs an instrument by placing his thumbprint on it. This instrument is
a. negotiable.
b. nonnegotiable, because a thumbprint does not state the signer’s name.
c. nonnegotiable, because a thumbprint implies a lack of binding intent.
d. nonnegotiable, because a thumbprint is not a signature.
____ 9. Karen writes on a piece of paper, “I owe you $600,” signs it, and gives it to Lou. This instrument is
a. negotiable.
b. nonnegotiable, because it does not include an express promise to pay.
c. nonnegotiable, because it does not recite any consideration.
d. nonnegotiable, because it does not state any conditions to payment.
____ 10. Ben, the owner of Construction Contractors, Inc., signs an instrument that includes the phrase “as per contract.” This instrument is
a. negotiable.
b. nonnegotiable, because information about the contract must be obtained from another source.
c. nonnegotiable, because it states an express condition to payment.
d. nonnegotiable, because the terms of the contract are not clear.