PLU-BUSA303-13-Chapter+14 - Chapter 14 Negotiable...

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Chapter 9 / Exercise 8
Accounting Using Excel for Success
Reeve/Warren
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Negotiable InstrumentsChapter 14BUSA303, Business Law and Ethics1
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Chapter 9 / Exercise 8
Accounting Using Excel for Success
Reeve/Warren
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Negotiable InstrumentsNegotiable Instrument:A signed writing that contains an unconditional promise or order to pay an exact amount, either on demand or at a specified future time. Also referred to as “commercial paper”.Examples:Orders to PayDraftsChecksPromises to PayPromissory NoteCertificate of DepositGoverned by the Uniform Commercial Code (UCC)BUSA303: Business Law and Ethics2
Types of Negotiable InstrumentsSection 14-1, pp. 376-379BUSA303, Business Law and Ethics3
Orders to PayDrafts. An unconditional written order(not a promise) to pay. The Draweris the party that creates the draft (e.g., the person who writes a check).The Draweeis the party who is ordered to pay (e.g., the bank)The Payeeis the party to whom the Drawee pays.Check. A form of a draft drawn on a bank or financial institution and payable on demand.Time or Sight.A draft can be a time draft (payable at a definite future time), a sight draft (payable on sight or on demand) or both(payable on sight after a set time). Exhibit 14-2(14-1a, p. 378)4/26/17BUSA303: Business Law and Ethics4
Promises to PayPromissory Notes. A written promise made by one person (the maker) to pay a fixed amount of funds to another person (the payee or a subsequent holder) on demand or on a specified date.Exhibit 14-3 (14-1b, p. 379)Certificates of Deposit.A note issued by a bank in which the bank acknowledges the receipt of funds from a party and promises to repay that amount, with interest, to the party on a certain date.Exhibit 14-4(14-1c, p. 379)4/26/17BUSA303: Business Law and Ethics5
Requirements for NegotiabilitySection 14-2, pp. 380-386BUSA303, Business Law and Ethics6
NegotiabilityNegotiable Instrument:A signed writingthat contains an unconditional promise or order to payan exact amount, either on demandor at a specified future time. Also referred to as “commercial paper”. In order to be negotiable, an instrument must:1.Be in writing. (14-2a, p. 380)2.Be signed by the maker or the drawer. (14-2b, p. 380)3.Be an unconditional promise or order to pay. (14-2c, p. 381)4.State a fixed amount of money. (14-2d, p. 382)5.

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