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Business and Finance Final Exam 3

Business and Finance

Final Exam 3

1. The Employment and Training of Veterans Act applies to government contractors and subcontractors

with contracts worth at least _____________.

A. $10,000

B. $15,000

C. $75,000

D. $100,000

2. The Employee Polygraph Protection Act prohibits employers from requiring employees or job applicants

from taking a lie detector test unless the testing of an employee is _____________.

A. in connection with the consumption of alcohol on the job site

B. in connection with the use of drugs or alcohol at the work place

C. in connection with an ongoing investigation involving economic loss to the employer's business

D. in connection with the misappropriation of funds by the employee

3. Which of the following items is not included as part of General Conditions?

A. substitutions

B. workmanship and materials

C. bid bond

D. shop drawings

4. According to Contractors Manual, under the "completed contract" method of revenue recognition, which

one the following determines if the project is complete enough to recognize profit?

A. the final inspection date has been set

B. billings totaling in excess of 98% to 99% of contract value been approved

C. the architect has issued a Certificate of Payment of Substantial Completion

D. the lending institution has rolled the construction loan into a permanent loan

5. A subcontractor has signed an AIA-A401 for a job. The subcontractor did not receive payment within 7

days of the provided agreement date. The subcontractor is going to submit a notice of intent to stop work at

the end of an additional 7 days. Who should the written notice be sent to?

A. the lending company

B. the contractor

C. the building department

D. the owner

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6. You own a piece of equipment purchased for $9,000. You may depreciate it over its useful life of 8

years. Using the straight line method, and assuming no salvage value, how much is the depreciation in the

third year?

A.$2,000

B. $1,498

C. $1,475

D. $1,125

7. According to the AIA, what areas should be addressed in a change order to a contract?

A. scope of work, change in contract amount, time adjustment

B. terms of payment, date of contract, scope of work

C. scope of work, change in contract amount, supervision requirements

D. notice to owner, scope of work, terms of payment

8. According to Contractors Manual, a lawsuit to enforce an oral contract must be brought within_______

A. 2 years

B. 3 years

C. 4 years

D. 5 years

9. All the following are general overhead fixed expenses except _______________.

A. payroll taxes of officers

B. rent

C. salary and wages of officers

D. union welfare

10. If a contractor wants to insure construction materials completely, from the time the materialsleave the

place of shipment until the materials reach their destination and are installed, thecontractor should purchase

a(an) ______________.

A. motor truck cargo owner's policy

B. transportation policy

C. contractor's equipment floater

D. installation floater

11. According to Contractors Manual, which party has lien rights?

A. sub-sub-subcontractor

B. laborer for sub-subcontractor

C. material supplier providing materials sold just for stock and not for direct delivery to the site

D. material man providing materials to another material man


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12. As a prerequisite to initial licensure or renewal of a license as certified or registered contractor, general

and building contractors must carry which of the following minimum insurance amounts?

A. $100,000 liability/$25,000 property damage

B. $250,000 liability/$75,000 property damage

C. $300,000 liability/$50,000 property damage

D. $500,000 liability/$100,000 property damage

13. What are the basic criteria for categorizing an item as a "fixed asset"?

A. the item cannot be moved

B. the item is liquid and can be turned into cash

C. the item is owned for more than six months

D. the item is not available to be turned into cash within one year

14. The Lien Laws requires that any person who receives funds for constructing or altering an

improvement, use the funds to pay others for services and materials provided in connection with the

project. A person who does not comply with this requirement may be ______________.

A. subject to discipline under the Contractor Licensing Laws only

B. criminally prosecuted under the Lien Law for a misdemeanor and subjected to discipline under

the Contractor Licensing Law

C. criminally prosecuted under the Lien Law for a misdemeanor only

D. criminally prosecuted under the Lien Law for felony and subjected to discipline under the

Contractor Licensing Law

15. According to the Florida Statues, Chapter 489, a contractor was found guilty of allowing their

certificate to be used by uncertified persons with intent to evade the provisions of Chapter 489.The

Construction Industry Licensing Board may revoke the certificate of the contractor, require financial

restitution to a consumer, and impose an administrative maximum fine of _____________.

A. $5,000

B. $5,000 or assess costs associated with investigation and prosecution

C. $10,000

D. $10,000 or assess costs associated with investigation and prosecution

16. Assets available to the contractor within one year are called _________________.

A. fixed assets

B. liquid assets

C. other assets

D. goodwill


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17. The statement: “Each employer shall furnish to each of his employees employment and a place of

employment which is free from recognized hazards that are causing or are likely to cause death or serious

physical harm to his employees.” is known as the ____________________.

A. General Duty Clause

B. Safe Workplace Bill of Rights

C. OSHA Number One

D. Oath of Office

18. A joint venture is a profit-seeking combination of two or more parties that _____________.

A. are registered with the Secretary of State for a specific purpose

B. are limited to construction of a project that does not exceed the equity deposits ofall partners

C. must have at least one licensed partner

D. are generally limited to a specific project or undertaking

19. According to Builder's Guide to Accounting, what is the BEST method for managing petty cash?

A. budgeted account method

B. cash receipt method

C. imprest system

D. ledger system

20. A qualifying agent for a construction business _____________.

A. must requalify the business every year

B. is legally qualified to act for the business in all matters connected with contracting

C. has the obligation to notify the governor when his address changes

D. keeps the company president from having to visit the job sites

21. A contractor is filing Form 941 for taxes which were withheld from employees for the first quarter of

the year (January, February, and March). All the taxes were deposited when they were due. According to

Contractors Manual, what is the LATEST date (without penalty) that the contractor can file this return?

A. April 15

B. April 30

C. May 10

D. May 15

22. According to Builder's Guide to Accounting, one of the objectives of the cost system is to do what?

A. allocate overhead

B. control deferred costs

C. identify overruns promptly so corrective action is possible

D. schedule costs and expenses


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23. Bidders and sub-bidders requiring clarification of the bidding documents shall make a written request to

the architect at least ________ days prior to the date for receipt of bids.

A. 3

B. 5

C. 7

D. 10

24. Which statement is NOT correct regarding the depreciation of equipment?

A. an allocation is given each year as an expense

B. assets decrease as depreciation accumulates

C. liabilities are reduced

D. the owner's equity increases

25. The contractor's delivery of equipment is delayed by a truck breakdown for 5 days. The contractor is

entitled to _______________.

A. a reasonable time extension as determined by the architect

B. an automatic time extension of 5 days

C. recovery of costs for accelerating the project by 5 days

D. time extension of 5 days plus reasonable job overhead costs

26. When does Form W-4 (Employee's Withholding allowance Certificate) expire?

A. January 31

B. February 15

C. when the employee gives the employer a new Form W-4(for example if marital status changes)

D. February 16

27. According to the Florida Construction Lien Law, one way an owner can minimize duties under the

Construction Lien Law is for the owner to ______________.

A. require that the contractor obtain a payment bond

B. post an irrevocable letter of credit

C. record a notice of commencement

D. require the contractor to provide him with a release of lien

28. Which of the following would be a result of a good inventory control policy?

A. materials needed for construction projects can be supplied faster

B. the need for storage space is increased

C the amount of materials exposed to theft or arson is increased

D. the maximum amount of money is tied up in inventory


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29. A construction company can determine the overall efficiency of its operation by determining its true

investment yield which is defined as the _______________.

A. gross profit to sales ratio

B. net income to sales ratio

C. net income to net worth ratio

D. gross profit to net worth ratio

30. The form of agreement between owner and contractor will be written on AIA Document ______.

A. AIA 101

B. AIA 201

C. AIA 401

D. AIA701

31. According to the Contractors Manual, the ratio that is determined by adding cash, accounts receivable

and marketable securities together and dividing by current liabilities is referred to as the _____________.

A. current ratio

B. quick ratio

C. leverage ratio

D. debt to equity ratio

32. According to the Contractors Manual, the two most commonly used liquidity ratios are the _________.

A. liquidity ratio and the leverage ratio

B. activity ratio and the quick ratio

C. current ratio and the quick ratio

D. liquidity ratio and the profitability ratio

33. Liquidated damages are ________________________.

A. damages from flood, storms, or broken pipes

B. unenforceable in the state of Florida

C. contract clauses requiring payments from the contractor for failure to complete work on time

D. the responsibility of the owner

34. Which of the following do not have lien rights?

A. material man supplying materials to a subcontractor

B. material man supplying materials to a sub-subcontractor

C. engineer with a direct contract with owner

D. material man supplying materials to another material man


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35. A qualifying agent for a business entity, who was in charge of a construction project under taken by that

business entity, is disciplined by the Construction Industry Licensing Board for willful or deliberate

disregard and violation of applicable building codes. According to Florida Construction Industry Licensing

Law, if any officer, director, or member of the business entity knew or should have known of the violation

and failed to take corrective action, the Board may impose a maximum combined total administrative fine,

per violation, against the business entity and the qualifying agent of _____________.

A. $ 2,500

B. $ 5,000

C. $ 7,500

D. $10,000

36. According to Florida Construction Lien Laws, if there are insufficient funds to pay all valid liens,

which of the following has first priority to be paid?

A. liens of the architect

B. liens of the materialman

C. liens of the contractor

D. liens of the laborer

37. What is the easiest way to maintain a perpetual inventory according to Builder's Guide to Accounting?

A. average cost method

B. first in — first out

C. last in — first out

D. specific cost

38. According to Contractors Manual, real estate may be depreciated using _____________.

A. a straight line method

B. an adjusted basis method

C. any accelerated method

D. the double declining balance method

39. According to Builder's Guide to Accounting, the base hourly labor rate will be increased because of

required taxes, insurance, and other benefits by approximately ____________.

A. 1/4

B. 1/3

C. 1/2

D. 3/4

40. How many employees must a contractor have for the Florida Workers' Compensation Act to be

applicable?

A. 1

B. 2

C. 3

D. 4


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41. A certified contractor operating as the qualifying agent and sole owner of a corporation was the low

bidder on a project. The contractor died after the bid was awarded but before the work started. The other

owner/officer of the contractor's estate is not a licensed contractor. Can the project legally be started by the

deceased contractor's firm and administered by the other owner/officer?

A. Yes, but only if the company obtains a registered or certified qualifying agent within 30 days of

the death of the contractor

B. Yes, but only if the company employs a registered or certified contractor as superintendent

C. Yes, but only if the board approves it

D. No

42. OSHA regulations require that injury and illness records be retained in each establishment for

_____calendar year(s) following the end of the year to which they relate.

A. 1

B. 3

C. 5

D. 7

43. According to AIA documents, the ___________ shall furnish surveys for the site of the project.

A. architect

B. general contractor

C. city or county

D. owner

44. A contractor would use the completed contract method of accounting when _____________.

A. most of the jobs last longer 24 months

B. the contractor wants a more realistic picture of actual financial performance

C. most of the jobs are small, or one-time work jobs with a single payment

D. the contractor has annual sales in excess of $10,000,000

45. Which activity is one of the most commonly followed preliminary project planning steps?

A. develop milestone check point list

B. obtain and review plans and specifications

C. relate project days to calendar days

D. scheduling the project

46. According to Builder's Guide to Accounting, controlling purchases using a purchase order system could

help you control ____________________.

A. accounts receivable

B. bad debts

C. job costs before you are committed

D. payroll


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47. Which of the following statements is true?

A. you must file a claim of lien within 45 days of the last day you furnish labor and supply materials

B. if the contract is less than $1,500 and you are not in privity with the owner, you may still have

lien rights

C. claim of lien must be served on the owner before or within 45 days after it is recorded

D. if claim of lien of lien is from a non-privity lienor (sub-subcontractor), Notice to

Owner must be served on both the owner and the contractor

48. When estimating the cost of transporting equipment to the job site, the estimator should

use _______________

A. the actual speed limits

B. the average of the speed limits

C. 30 to 40% of the speed limits

D. 40 to 65% of the speed limits

49. When demolishing a building, the project manager encountered asbestos in the walls, which was not

shown or disclosed in the plans or specifications for the project. The general conditions of AIA Documents

specifically say the contractor should _____________________.

A. contact the local building department

B. continue working, but monitor employees for any signs of health problems

C. immediately stop work in the affected area and notify the owner and architect by phone

D. immediately stop work in the affected area and notify the owner and architect in writing

50. According to Florida Contractors Manual, accounts receivable are classified as _____________.

A. assets

B. deferred liability

C. debits

D. liabilities


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Page 9

47. Which of the following statements is true?

A. you must file a claim of lien within 45 days of the last day you furnish labor and supply materials

B. if the contract is less than $1,500 and you are not in privity with the owner, you may still have

lien rights

C. claim of lien must be served on the owner before or within 45 days after it is recorded

D. if claim of lien of lien is from a non-privity lienor (sub-subcontractor), Notice to

Owner must be served on both the owner and the contractor

48. When estimating the cost of transporting equipment to the job site, the estimator should

use _______________

A. the actual speed limits

B. the average of the speed limits

C. 30 to 40% of the speed limits

D. 40 to 65% of the speed limits

49. When demolishing a building, the project manager encountered asbestos in the walls, which was not

shown or disclosed in the plans or specifications for the project. The general conditions of AIA Documents

specifically say the contractor should _____________________.

A. contact the local building department

B. continue working, but monitor employees for any signs of health problems

C. immediately stop work in the affected area and notify the owner and architect by phone

D. immediately stop work in the affected area and notify the owner and architect in writing

50. According to Florida Contractors Manual, accounts receivable are classified as _____________.

A. assets

B. deferred liability

C. debits

D. liabilities


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Page 10

Q A Section/Page# Book

1. D 5-46 Contractors Manual

2. C 5-50 Contractors Manual


4. B 3-80 Contractors Manual

5. B 4.8 A.I.A.401

6. D 163 BGA

Equipment Value ÷ Useful Life = Annual Depreciation.

$9,000 ÷ 8 = $1,125

7. A 7.2.1 A.I.A.201


9. D 143 BGA




13. D 252 BGA

14. D 9-119, 9-120, Contractors Manual

713.345(1)(a)(b)(c)(d)

15. D 2-95, 489.129(1)(e) Contractors Manual

16. B 252 BGA

17. A 7-6 Contractors Manual


19. C 207 BGA

20. B 2-20 - 2-21, 2-88, Contractors Manual

489.1195(1)(a)

21. C 3-156 Contractors Manual (Circular E Employer's Tax Guide)

22. C 188 BGA

23. C 3.2.2 A.I.A.701

24. D p 155-161 BGA

Answer A is correct, Page 155 and 161

Business and Finance Final Exam 3Answer Key

Business and Finance Final Exam 3 - Answer Key

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Page 11

Answer B is a correct statement, Page 157

Answer C is a correct statement, Page 155

you minimize your taxes which is a liability

because depreciation is an expense against income,

Answer D is not a correct statement because depreciation has

no effect on the owner's equity

25. A 8.3.1 A.I.A.201

26. C 3-168 Contractor Manual (Circular E, Employer's Tax Guide)

27. A 9-46, 9-56, 9-105, Contractors Manual

713.23(1)(a)

28. A Page 121,122 BGA

29. C Page 272 BGA

30. A Article 8 A.I.A.701



33. C 3-108, 8-13 Contractors Manual


35. D 2-95, 489.129(1) Contractors Manual

36. D 9-17, 713.06(4)(a) Contractors Manual

37. C 120 BGA


39. B 228 BGA


41. C 2-89, 489.121 Contractors Manual


43. D 2.3.4 A.I.A.201

44. C 25 BGA


46. C 116 BGA

47. D 9-75, 713.06(2)(a) Contractors Manual


49. D 10.3.1 A.I.A.201

50. A 3-16, 3-18, 3-19 Contractors Manual (In many tables under ASSETS)

Business and Finance Final Exam 3 - Answer Key