Earl Issues a Check Drawn on First National Bank to Good

question 5

Multiple Choice

Earl issues a check drawn on First National Bank to Good Office Supply to pay for six filing cabinets. Later, Earl discovers defects in the goods and orders First National to stop payment on the check. Earl does not renew the order, and the bank clears the check eight months later. The bank

• A) must recredit Earl's account and substitute acceptable goods.
• B) must recredit Earl's account or substitute acceptable goods.
• C) must substitute acceptable goods but not recredit Earl's account.
• D) need not recredit Earl's account or substitute acceptable goods.

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Definitions:

Controllable Margin

The portion of profit or margin over which management has control, often excluding fixed costs.

Average Assets

A financial metric calculated by taking the average of a company's total assets at the beginning and end of an accounting period, used to assess performance efficiency.

ROI

Return on Investment, a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of several different investments.

Required Rate

A term often used to signify the minimum return or yield that investors expect from an investment, considering the risk involved.