Wendell Bought a Widget from Sharon and Used a Cheque

question 11

Multiple Choice

Wendell bought a widget from Sharon and used a cheque to pay the purchase price of $10 000.Wendell made the cheque payable to Sharon personally.That cheque was drawn on Wendell's account at the Bank of Gander.A thief stole the cheque from Sharon, forged her general endorsement, and sold the cheque to Oren.Oren then endorsed the cheque and negotiated it to Abby.Which of the following statements is TRUE?

• A)Abby is entitled to sue Wendell because the forgery does not affect the fact that he promised to pay $10 000.
• B)Wendell owes a debt to Oren.
• C)Because forgery is a real defence, Abby cannot sue anyone except the person who committed the forgery.
• D)If the Bank of Gander paid $10 000 to Abby and debited Wendell's account, Wendell can force the bank to repay $10 000 into his account if he acts promptly.
• E)In the final analysis, the Bank of Gander will necessarily suffer the loss if it honoured the cheque and paid $10 000 to Abby.

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Definitions:

Closing Entry

Journal entries made at the end of an accounting period to transfer the balances of temporary accounts to a permanent equity account, thereby preparing the books for the next period.

Correct Closing Entry

Journal entries made at the end of an accounting period to transfer balances from temporary accounts to permanent accounts, thus preparing the books for the next period.

Adjusting Entry

Journal entries made in accounting records at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.

Inventory of Supplies

The total value of supplies held by a company that are yet to be used in production or sold.