Zachary, Who Has Been Authorized to Write a Check from a Company

question 37

Multiple Choice

Zachary, who has been authorized to write a check from a company account to pay employees, draws bonus checks from the company account for five fictitious employees, endorses the checks in their names, and deposits those into his own bank account. Which of the following is true regarding whether the company will be required to take the loss on the checks?

• A) Under the fictitious payee rule, the company will be required to take the loss on the checks unless the company can obtain the funds from Zachary.
• B) Under the imposter rule, the company will be required to take the loss on the checks unless the company can obtain the funds from Zachary.
• C) Under the transferor rule, the company will be required to take the loss on the checks unless the company can obtain the funds from Zachary.
• D) Under the employee-liability rule, in addition to its rights in regard to Zachary, the company will be able to recover from any bank that cashed the checks.
• E) Under the banking liability act, in addition to its rights in regard to Zachary, the company will be able to recover from any bank that cashed the checks.