Jones, a food wholesaler whose company has an account with City Bank in New York City, is traveling in California on business.

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Jones, a food wholesaler whose company has an account with City Bank in New York City, is traveling in California on business.

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Jones, a food wholesaler whose company has an account with City Bank in New York City, is traveling in California on business. He finds a particularly attractive offer and decides to buy a carload of oranges for delivery in New York. He gives Saltin, the seller, his company’s check for $25,000 to pay for the purchase. Saltin deposits the check, with others he received that day, with his bank, the Carrboro Bank. Carrboro Bank sends the check to Downs Bank in Los Angeles, which in turn deposits it with the Los Angeles Federal Reserve Bank. The L.A. Fed sends the check, with others, to the N.Y. Fed, which forwards the check to City Bank, Jones’s bank, for collection.
a. Is City Bank a depositary bank? A collecting bank? A payor bank?

Jones, a food wholesaler whose company has an account with City Bank in New York City, is traveling in California on business. He finds a particularly attractive offer and decides to buy a carload of oranges for delivery in New York. He gives Saltin, the seller, his company’s check for $25,000 to pay for the purchase. Saltin deposits the check, with others he received that day, with his bank, the Carrboro Bank. Carrboro Bank sends the check to Downs Bank in Los Angeles, which in turn deposits it with the Los Angeles Federal Reserve Bank. The L.A. Fed sends the check, with others, to the N.Y. Fed, which forwards the check to City Bank, Jones’s bank, for collection.
b. Is Carrboro Bank a depositary bank? A collecting bank?

Jones, a food wholesaler whose company has an account with City Bank in New York City, is traveling in California on business. He finds a particularly attractive offer and decides to buy a carload of oranges for delivery in New York. He gives Saltin, the seller, his company’s check for $25,000 to pay for the purchase. Saltin deposits the check, with others he received that day, with his bank, the Carrboro Bank. Carrboro Bank sends the check to Downs Bank in Los Angeles, which in turn deposits it with the Los Angeles Federal Reserve Bank. The L.A. Fed sends the check, with others, to the N.Y. Fed, which forwards the check to City Bank, Jones’s bank, for collection.
c. Is the N.Y. Fed an intermediary bank?

Jones, a food wholesaler whose company has an account with City Bank in New York City, is traveling in California on business. He finds a particularly attractive offer and decides to buy a carload of oranges for delivery in New York. He gives Saltin, the seller, his company’s check for $25,000 to pay for the purchase. Saltin deposits the check, with others he received that day, with his bank, the Carrboro Bank. Carrboro Bank sends the check to Downs Bank in Los Angeles, which in turn deposits it with the Los Angeles Federal Reserve Bank. The L.A. Fed sends the check, with others, to the N.Y. Fed, which forwards the check to City Bank, Jones’s bank, for collection.
d. Is Downs Bank a collecting bank?

Explanation & AnswerSolution by a verified expert

Explanation

A depository bank is a bank where the check is deposited for the purpose of encashing it by the check holder.
The bank that collects the checks is known as a collecting bank.
The payor bank makes the payment from the drawer's account to whom the check is drawn by the drawer.
Bank Ci is the payor bank because it forwards the check of Individual J and also settles the check.

Verified Answer

Bank Ci comes under the category of a payor bank as per the case.
Bank Ci settles the check since it is the bank of Individual J.
Bank Ci does not play the role of a depository bank or a collecting bank.

Explanation

Individual S’s account is credited with the value of the check deposited by the depository bank, which is Bank Ca.
To complete the settlement and make the credit final, Bank Ca handles the check and moves it forward to the payor bank for collection. That is why, Bank Ca is the collecting bank.

Verified Answer

Bank Ca is considered both a depository bank and a collecting bank. The check is deposited by Individual S with Bank Ca. So, Bank Ca is the depository bank.
Bank Ca handles the check deposited for collection. So, it is also the collecting bank.

Explanation

An intermediary bank acts as the link between banks in two counties. Intermediary banks are required for transfers when the issuing and receiving banks do not have any direct commitments, in relation to financial transactions.
Bank N is an intermediary bank between the two banks, which are Bank D and Bank C.

Verified Answer

Bank N acts as the intermediary between Bank D and Bank C. Bank N receives the check from Bank D and forwards it to Bank C.
Bank D and Bank C do not have any direct transactions. So, Bank N acts as the intermediary bank.

Explanation

When the buyer and seller bank are not the same, the requirement for an intermediary bank arises. The intermediary bank collects the check, clears them, and then forwards them to the drawer’s bank.
As per Article 4, Bank C transfers the check to Bank D since the depository and payor banks are not the same.
Bank D, a member of Association C, forwards the settlement of accounts to Association C. Bank D serves as the collecting bank.

Verified Answer

Bank C passes the check to Bank D as per Article 4 since the depository and payor banks are not the same.
Bank D, a member of the Association C, forwards the check to Association C for settlement of the accounts. Bank D acts as the collecting bank.

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