In December, Whalley Company hired Nancy Cherauka as its bookkeeper. Her duties included…

In December, Whalley Company hired Nancy Cherauka as its bookkeeper. Her duties included preparing checks, taking deposits to the bank, and reconciling the monthly checking account statements. She was not authorized to sign or cash checks. Between the following January 24 and May 31, Cherauka forged 49 checks on the Whalley account at National City Bank. Each month, National City Bank sent Whalley a statement and the canceled checks (including the forgeries) it had paid the previous month. The president of Whalley looked at the statement to see the balance in the account, but he did not look at the individual checks. Then he gave the statement and checks to the bookkeeper. The January 24 forged check was sent to Whalley on February 3. In June, Whalley discovered that Cherauka was forging checks and fired her. It then brought a lawsuit against National City Bank to force it to recredit Whalley’s account with the total amount of the 49 checks. Whalley claimed that the checks were not properly payable from the account. Is National City required to recredit Whalley’s account?

 

 

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