S05 R-6 Class Questions Preview - Regulation 6 Class...

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Regulation 6 Class Questions 1 1. CPA-01088 Under the Commercial Paper Article of the UCC, which of the following documents would be considered an order to pay? I. Draft. II. Certificate of deposit. a. I only. b. II only. c. Both I and II. d. Neither I nor II. CPA-01088 Choice "a" is correct. Order paper is three-party paper where one person orders another to pay yet a third person. A draft is order paper. A certificate of deposit is two-party paper. In a CD, a bank acknowledges receipt of money and promises to pay. UCC 3-104 2. CPA-01090 To: Middlesex National Bank September 15, 1994 Nassau, NY Pay to the order of Robert Silver $4,000 Four thousand and 00/100 - - - - - - - - - - - - - - - - - - - - - dollars on October 1, 1994 Lynn Dexter Lynn Dexter The above instrument is a: a. Draft. b. Postdated check. c. Trade acceptance. d. Promissory note. CPA-01090 Choice "a" is correct. A draft is an order by the drawer to a drawee to pay a payee. Here, Dexter is ordering Middlesex National Bank to pay to the order of Silver. UCC 3-104. Note the two different dates. Choice "b" is incorrect. A check is a draft drawn on a bank and payable on demand. The instrument illustrated is not payable on demand since it is to be paid on October 1, 1994. Thus it is not a check, but rather is a time draft. Choice "c" is incorrect. A trade acceptance is order paper drawn by the payee on the drawee. Choice "d" is incorrect. A promissory note is two-party paper; i.e., where one party promises to pay. In the instrument illustrated, one party (Dexter) is ordering another party (Middlesex National Bank) to pay.
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Regulation 6 Class Questions 2 3. CPA-01081 Under the Negotiable Instruments Article of the UCC, which of the following statements is(are) correct regarding the requirements for an instrument to be negotiable? I. The instrument must be in writing, be signed by both the drawer and the drawee, and contain an unconditional promise or order to pay. II. The instrument must state a fixed amount of money, be payable on demand or at a definite time, and be payable to order or to bearer. a. I only. b. II only. c. Both I and II. d. Neither I nor II. CPA-01081 Choice "b" is correct. To be negotiable, the instrument must: 1. Be in writing 2. Signed by the maker or drawer (not drawee) 3. Unconditional promise or order 4. To pay a fixed amount of money 5. On demand or at a definite time 6. To order or bearer Alternative I is incorrect because there is no requirement that the drawee sign.
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Regulation 6 Class Questions 3 4. CPA-01159 An instrument reads as follows: $10,000 Ludlow, Vermont February 1, 1993 I promise to pay to the order of Custer Corp. $10,000 within 10 days after the sale of my two-carat diamond ring. I pledge the sale proceeds to secure my obligation hereunder. R. Harris
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S05 R-6 Class Questions Preview - Regulation 6 Class...

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