L-NU AA-23-02-01-18

LYCEUM-NORTHWESTERN UNIVERSITY
Tapuac District, Dagupan City

COLLEGE OF BUSINESS EDUCATION

FINALS EXAMINATION – ACCTG 25 Negotiable Instruments Law

1st Semester, AY 2019– 2020
Prepared by: Amie Jane R. Miranda, CPA

Name:_____________________________________ Score:____________________

Student No.: _______________ Year/Section:___________ Date of Exam: ____________

I. MULTIPLE CHOICES. Choose the best answer from the choices and encircle your answer. Strictly “NO
ERASURES”.

1. The acceptor, by accepting the instrument, admits the following, except the:
a. Existence of the payee
b. Capacity of the payee to indorse
c. Genuiness of the drawer’s signature
d. Right of the holder to enforce payment of the instrument
2. The maker, by making the instrument, has the following liabilities, except:
a. The engagement to pay the instrument according to its tenor.
b. The admission of the existence of the payee.
c. The admission of the capacity of the payee to indorse the instrument
d. The admission of the right of the holder to enforce payment of the instrument
3. A check must be in writing and signed by the drawer for it to be negotiable. In addition, a check
must have the following requisite, except:
a. It must contain an unconditional order to pay a sum certain in money
b. It must be payable at a fixed or determinable future time
c. It must be payable to order or to bearer
d. The bank drawee must be named with reasonable certainty
4. Which of the following defenses may a party to an instrument avail himself of against any
holder?
a. Want of delivery of incomplete instrument
b. Want of authority to complete an instrument that was delivered.
c. Want of delivery of complete instrument
d. Want or absence of consideration
5. M makes a promissory note payable to the order of P for Php 5,000.00. After delivery to P, P
changed the amount of US$ 5,000.00. Thereafter, P indorsed the note to A, A to B, B to C, C to D
and D to H. The parties subsequent to P were not aware of the alteration made by P. Based on
the foregoing facts, which of the following statements is incorrect?
a. H can hold M liable for US$ 5,000.00 if H is a holder in due course.
b. H can hold M liable for Php 5,000.00 if H is a holder in due course
c. H cannot hold M liable for any amount if H is not a holder in due course.
d. H can hold A, B, C and D liable for US$ 5,000.00 even if H is not a holder in due course
6. M, maker, P, payee, of a note payable to the order of P. The back of the note contains the
indorsement of P to A, A to B, B to C, C to D and D to H, a holder in due course in due course.
Assume the following independent facts:
I. M is insolvent.
II. P is a minor.
III. A’s signature was forged.
If C were qualified indorser, which of the foregoing independent facts will not affect his liability
(i.e he will still be liable) although he was not aware of any of them?
a. I and II
b. II and III
c. I and III
d. I, II and III

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7. Refer to the preceeding number. Assuming that C were a general indorser, which of the
foregoing facts enumerated (I, II and III) will not affect his liability (i.e., he will still be liable)
although he was not aware of any of them?
a. I and II
b. II and III
c. I and III
d. I, II and III
8. Which of the following indorsements is a qualified indorsement?
a. “Pay to Angelo Amores for collection.”
b. “Pat to Angelo Amores in trust for Teofilo Tangco.”
c. “Pay to Angelo Amores. Indorser not holden.”
d. “Pay to Angelo Amores. Notice of dishonor waived.”
9. M made a promissory note payable to P or bearer. After its delivery to him, P indorsed the note
to A. While the note was in the possession of A, F stole the note and negotiated it to B by forging
A’s signature. Thereafter, B indorsed the note to C, C to D, and D to H, a holder in due course.
Which of the following defenses are available to M, P and A against H?
I. Forgery of A’s siganture.
II. Want of delivery of the note by A since the note was stolen from him.
a. Both defenses are available to M, P and A.
b. Both defenses are not available to M, P and A.
c. Only I is available.
d. Only II is available.
10. A check differs from a bill of exchange because a check;
a. Does not require the drawer to have funds with the drawee.
b. May be drawn against a person other than a bank.
c. Is always payable on demand
d. Is required to be presented for acceptance in certain cases.
11. A holder is still a holder a holder in due course arlthough:
a. He received the instrument after is has become overdue but he has no knowledge of it.
b. He received the instrument after it was dishonored and he has no notice of such dishonor.
c. He did not give any value for it.
d. The instrument was not complete and regular on its face.
12. Which of the following is a common liability of the drawer, maker and acceptor?
a. The admission of the genuiness of the signature of any indorser.
b. The admission of the existence of the payee and his capacity of the payee to indorse.
c. The admission that the instrument is covered with sufficient funds.
d. The engagement on the payment of the instrument according to its tenor.
13. Which of the following is a real defense?
a. Illegality of contract expressly so declared in a statute.
b. Illefality of contract because it was issued for unlawful consideration.
c. Renunciation before maturity.
d. Fraud in inducement.
14. These statements are presented to you:
I. An instrument payable on demand has no date of maturity.
II.When a transfer of an instrument is effected on the date of maturity, the holder is considered
to have taken the instrument when it is already overdue; hence, he is no longer a holder in
due course.
In your evaluation of the foregoing statements:
a.Both statements are true.
b.Both statements are false.
c. Only statement I is true.
d.Only statement II is true.
15. The separate paper attached to an instrument on which an indorsement or acceptance of the
instrument is written is called:
a. Allonge
b. Memorandum
c. Enclosure
d. Attachment

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 16. One of the following can set up the defense of forgery in an instrument payable to order. Who is
it?
a. An indorser, if the maker’s signature is forged.
b. The acceptor, if the drawer’s signature is forged.
c. A person negotiating by mere delivery if a prior party’s signature is forged.
d. The maker, if an indorser’s siganture is forged.
17. In order that a person may be held liable as an accommodation party, the following requisites
must concur, except:
a. He has signed the instrument as maker, drawer, acceptor or indorser.
b. He has not received any value for such making drawing, accepting or indorsing the
instrument.
c. His purpose of signing the instrument is to lend his name or credit to some other person.
d. The holder must have no knowledge that such person signed the instrument as an
accommodation party.
18. Which of the following statements pertaining to indorsements is incorrect?
a. The indorsement must be of the whole instrument.
b. The signature of the indorser without additional words is sufficient.
c. Indorsers are liable in the order in which they indorse.
d. If an instrument is delivered without indorsement, negotiation takes effect at the time of
delivery even if the instrument is subsequently indorsed.
19. Which of the following does not discharge the instrument?
a. Payment in due course the accommodated party.
b. Intentioanal cancellation of the instrument by the holder.
c. When the principal debtor becomes the holder in his own right before maturity.
d. Payment in due course by or on behalf of the principal debtor.
20. A party secondarily liable is discharged througgh any of the following means, except the:
a. Intentional cancellation of his signature by the holder.
b. Discharge of the prior party.
c. Release of the principal debtor.
d. Extension of the time of payment which is assented to by such secondarily liable.

II. TRUE OR FALSE. Write on the space provided true if the statement is correct otherwise write false if
the statement is incorrect. No erasures.

21. When an instrument containing the words “I promise to pay” is signed by two or more persons,
they are deemed to be jointly and severally liable.
22. When a signature is so placed upon the instrument that it is not clear in what capacity the
person making it intended to sign, he is deemed to be an indorser.
23. When an indorsement is forged in a promissory note payable to bearer, the party whose
indorsement was forged and all parties prior to him may raise the defense of forgery against any
holder.
24. A pre-existing debt constitutes value and may be the consideration of an instrument.
25. Want or absence of consideration is a defense against a holder in due course.
26. A negotiable instrument may not be transferred by assignment.
27. A perosn signing an instrument as an agent is not liable thereon provided he is duly authorized,
dscloses his principal, and indicates thathe is signing as an agent.
28. An indorsement made by a minor passes title to the instrument although he himself does not
incur any liability on the instrument.
29. An indorsement may be written on a separate sheet which is attached to the instrument.
30. As arule, an indorsement must be of the whole amount of the instrument.
31. An indorsement to two or more indorsees severally such as “Pay to A, 10,000 and to B 5,000” is
a valid indorsement of the instrument.
32. Indorsers are liable prima facie in the order in which they indorse.
33. Joint payees or joint indorsees are deemed to indorse jointly and severally.
34. When an instrument originally payable to bearer is specially indorsed, the person indorsing
specially is liable only to such holders as make title through his indorsement.

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 35. When a negotiable instrument is delivered without any indorsement, the negotiation takes
effect at the time of its first delivery if it is subsequently indorsed.
36. An instrument negotiable in origin continues to be negotiable until it is restrictively indorsed or
discharged by payment or otherwise.
37. When an instrument is negotiated to a prior party, the prior party can go after the intrevening
parties for the amount of the instrument.
38. A holder may still be a holder in due course even if the instrument is not dated.
39. If an instrument stamped with the words “no sufficient funds” is negotiated, the holder will no
longer be considered a holder in due course.
40. A personal defense is available only against a holder not in due course.

III. ENUMERATION: Write your answer on the space provided. Wrong spelling considered wrong.

Warranty given by indorser negotiated by delivery/ qualified indorsement:

41.
42.
43.
44.

Warranty given by general indorser:

45.
46.
47.
48.

Three classes of cases regarding with the liability of anomalous indorser:

49.
50.

ajmiranda
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Goodluck and Godbless

Reviewed and Checked by:

Dr. Genoveva Y. Reyes, CPA, FRIAcc

Dean, College of Business Education

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