Lucas writes a check to Paige for $250. The face of the check says, "pay to the orderof Paige." Paige signs the check on the back and heads to the bank. Before Paige getsto the bank, however, Paige loses the check. Paige is not really worried, though,because the check is made out to her. If Carla finds the check and tries to cash it,Carla will:be able to cash the check because it is bearer paper.be able to cash the check because it is order paper.be unable to cash the check because it is bearer paper.

Answered: Lucas writes a check to Paige for $250.…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter8: Fraud, Internal Controls, And Cash

Section: Chapter Questions

Problem 4TP: The vice president of finance asks the accounts payable (AP) clerk to write a check in the name of...

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Question

Lucas writes a check to Paige for $250. The face of the check says, "pay to the order
of Paige." Paige signs the check on the back and heads to the bank. Before Paige gets
to the bank, however, Paige loses the check. Paige is not really worried, though,
because the check is made out to her. If Carla finds the check and tries to cash it,
Carla will:
be able to cash the check because it is bearer paper.
be able to cash the check because it is order paper.
be unable to cash the check because it is bearer paper.

Expert Solution

Step 1: Introduction

Negotiable instruments are financial instruments that can be transferred from one person to another in order to transfer a specific right or entitlement. These instruments include checks, promissory notes, and bills of exchange.

The transfer of negotiable instruments is governed by specific laws and regulations that establish the rights and obligations of the parties involved in the transfer. These laws typically require that the transfer be made in writing, and that the instrument be properly endorsed by the original holder.