CHARLESTON, ILL., Jan. 24, 101.9 No. 527 FIRST NATIONAL BANK. Twelve and 100 COLLECTIBLE AT PAR THROUGH, THE FEDERAL RESERVE BANK OF CHICAGO. 55 $12550 DOLLARS Richard Roe When John Doe presents this check for payment he must indorse it. What has been said about the indorsement of a promissory note is true for the indorsement of a check. When money is paid for a check the check is said to be cashed. A check may pass through a number of hands before reaching the bank on which it is drawn. When the First National Bank pays the above check it deducts $12.55 from Richard Roe's account. The check is then marked "Paid " and is later returned to Richard Roe. Since John Doe has indorsed the check it becomes a receipt from him to Richard Roe for the payment of $12.55. Many people pay all bills by checks. In this way they keep accurate accounts of all payments made, and the canceled checks become receipts. If a depositor has drawn checks for an amount that is more than his deposits, he is said to have overdrawn his account, and the amount that he has overdrawn his account is called an overdraft. Most banks are prohibited by law from paying a depositor's checks when the depositor's account is overdrawn. Banks usually desire to balance all pass books monthly. The balanced pass book shows the sum of the checks drawn, the sum of the deposits made, and the balance due the depositor. Exercise 84 1. In the check on page 169 who is the payee? What is the face? 2. How may John Doe get the money for this check? Write the indorsement. 3. Give two reasons for paying bills by checks rather than by paying the money. 4. William Burke opens an account with the Merchants Bank of Indianapolis, Indiana, on January 3, 1920. He deposits $225 in currency, $46.50 in silver, and $238 in checks. Make out the deposit slip. What does Mr. Burke receive from the bank when he makes the deposit? 5. Three days later he buys a horse from Eugene Hays for $225, and pays for it with a check. Write the check. 6. How may Eugene Hays get the money for this check? Properly indorse the check. 7. On January 17 William Burke goes to the bank and draws out $40. Write the check that he must give the bank. Make it payable to Cash. Does such a check need indorsement? 8. During January and February William Burke makes the following deposits: January 25, $42; February 4, $195.46; February 16, $116. During these months he draws the following additional checks: January 25, $5.65 ; February 12, $10; February 18, $36.18; February 27, $176.30. On March 1 his pass book is balanced, What is his balance? 9. On March 17 William Burke sends his son John R. Burke, who is at college, a check for $100. Write this check. Tell the maker, face, and payee of this check. 10. Oscar Rodgers sells his chickens to John M. Wilkins. The chickens weigh 36 pounds and bring 18 cents a pound. Payment is made by a check on the Second National Bank of Peoria, Illinois. The check is dated July 24, 1921. Oscar Rodgers indorses the check in full to M. N. Kopta, who indorses it in blank when he cashes it at a bank. Write the check and the indorsements. 11. A. M. Beals pays his month's bill of $5.37 due the Star Laundry with a check. The check is drawn on the Merchants Bank of St. Louis, Missouri, and dated June 2, 1920. Write the check. If this check is made payable to order, who must indorse it? Who finally gets the check? Should he keep it or destroy it? Give reasons for your answer. 12. Suppose that when the check mentioned in the last exercise is presented at the bank for payment, it is found that A. M. Beals has only $1.78 on deposit. What will probably happen? 13. R. M. Parker has a bank balance of $346.28. He draws the following checks: Aug. 10, $36; Aug. 18, $42.50; Aug. 27, $212.18; Sept. 6, $12.18. Find the condition of his bank account after these checks are cashed. 14. A note given by T. N. Flint, dated July 10, 1920, promises to pay H. R. Halifax $275 three months after date with interest at 7%. The note is paid by check when due. Write the check, which was drawn on the Citizens Bank of Chattanooga, Tennessee. 15. The check of problem 14 was cashed by A. R. Allison who deposited it in the First National Bank of Chattanooga. To whom will this check finally go? Mr. Allison indorses it in such a way that he does not become responsible for its payment. Write all the indorsements this check must finally have. 16. If a check payable to order were lost could it be collected by the finder if it had not the indorsement of the payee? Could it be collected by the finder if indorsed in blank by the payee? To whom would the check finally go? Would he know who had received the money? 17. Write a check which could be cashed by anyone holding it. 81. Borrowing money from a bank. As it is not probable that all of its depositors will want to withdraw their money at the same time, a bank finds it possible to lend a large part of its deposits and still have money enough to pay the checks of its depositors. It is the interest charged for the money lent that pays the bank for taking care of the deposits and for the necessary bookkeeping. The following is a form of note used by many banks. promise to pay to the order of CONTINENTAL AND COMMERCIAL NATIONAL BANK OF CHICAGO, at its office, Five Hundred and s 100 with interest at the rate of seven per cent. per annum, after maturity until paid. Address: DOLLARS, James R. Walker Oscar B. Simons The interest on $500 for 60 days at 7% is $5.83. This amount is deducted from the face of the note, and the remainder, $494.17, is the amount that the makers of the note receive from the bank. The amount due on the above note at maturity is $500. The interest is computed on this amount and is collected when the loan is made. Interest that is collected in advance, on the amount due at the maturity of the note, is called bank discount. This note is due September 17. If it is not paid when due, it draws interest from maturity, September 17, to the date of payment. The difference between the amount due at maturity and the bank discount is called the proceeds. In the above note the proceeds are $494.17. The exact number of days from the day of discount to the day of maturity is called the discount period. Exercise 85 Find the bank discounts on the following amounts: 1. $800 for 90 days at 7%. 2. $5000 for 6 months at 6%. 3. $750 for 30 days at 5%. 4. $1250 from May 10 to July 8 at 7%. 5. $135 from Oct. 8 to Dec. 12 at 6%. 6. $1000 from Jan. 10, 1919, to May 12, 1919, at 5%. 7. $3000 from Dec. 1, 1919, to March 10, 1920, at 6%. 8. $15,000 from Oct. 26 to Feb. 4 at 5%. 9. In the note on page 172 name the makers, payee, and face. What is the amount due at maturity? The discount period? The bank discount? The proceeds? 10. G. H. Banks gives a note for $1200 to the Citizens Bank of Detroit, Michigan, for 90 days with interest at 7% from maturity. The date of the note is May 5, 1917. Write the note. 11. In the last exercise how much is due at maturity? What is the discount period? When is the note due? What is the bank discount? What are the proceeds? What amount does G. H. Banks get from the bank? What amount does he pay interest on? 12. Fill out the following table. Each note is discounted the day it is made. 13. State the amount that the borrower receives from the bank in each part of the preceding exercise. |