1 Exam Prep Business and Finance Practice Test 4

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1 1 Exam Prep Business and Finance Practice Test 4 1. All the following are normally required for a loan application except. A. an income statement B. a balance sheet C. a tax return D. retained earnings 2. According to Contractors Manual, what is the accounting term that describes the maintenance of a record of each invoice and each partial payment made, including late fees, interest, and discounts? A. transaction statement method B. subsidiary ledger method C. open invoice method D. note payable ledger method 3. According to the Builder's Guide to Accounting, the only reasonable way to assign overhead is in proportion to what? A. income B. total expenses C. cost of materials D. direct labor hours 4. A previously unrecognized error or omission in the contract documents resulted in damages on a project. According to AIA-A201, the contractor is: A. liable to the owner, only B. liable to the architect, only C. not liable to the architect or the owner D. liable to both the architect and the owner 5. According to AIA-A201, if the contractor does not agree with the method for adjustment in the contract sum for a change order, who will determine the method and the adjustment? A. the owner B. the contractor C. the architect D. the engineer 1 Exam Prep Business and Finance Practice Test 4 1

2 6. CPM and PERT are methods of construction. A. estimating B. scheduling C. accounting D. purchasing 7. All the following are characteristics of a cost-plus contract except that. A. the contractor's fee can be designated as a fixed percentage of the cost B. it usually only requires the contractor's best efforts be used to accomplish the work C. it provides for reimbursement of defined costs incurred, plus a fee for the D. contractor's services it provides for a stated price for the total amount of work to be performed on a project 8. A contractor observes a concealed condition that differs materially from that indicated in the contract documents. According to AIA-A201, in order to make a claim related to these concealed conditions, the contractor must notify the architect within how many days of the date of observance of the concealed condition? A. 7 B. 21 C. 30 D A subcontractor neglects to carry out the work in accordance with the contract agreement. According to AIA-A401, when must the contractor make good on such deficiencies? A. immediately B. after waiting a total of three days for the subcontractor C. if the subcontractor fails within three business days after receipt of written notice from the contractor to commence and continue correction of such default or neglect D. if the subcontractor fails within five business days after receipt of written notice from the contractor to commence and continue correction of such default or neglect 10. According to the Contractors Manual, the square footage method of estimating is not recommended for. A. guaranteed maximum price contracts B. cost t-plus fee contracts D. cost-plus contracts D. lump-sum contracts 1 Exam Prep Business and Finance Practice Test 4 2

3 11. What is meant by "discount" on a loan? A. the credit given to a contractor for experience B. the credit given the owner (borrower) for credit worthiness C. a one-time charge made as a percentage of a loan normally deducted from the amount of the loan D. the amount of the current prime lending rate charged for processing the loan 12. All the following can be accomplished as the result of a good cash budget except: A. plans for the use of excess funds when they are available B. reconciliation of the bank statement C. preparation for tax liabilities D. cash availability for day to day operations 13. To become valid, a change order must be signed by the: A. architect, owner and building inspector B. owner, contractor and lender C.architect, owner and contractor D. owner, architect and job superintendent 14. According to AIA - A701, the owner shall, at the request of the bidder to whom the award of a contract is under consideration, furnish reasonable evidence that financial arrangements have been made to fulfill the contract within how many days prior to expiration of the time for withdrawal of bids? A. 3 days B. 4 days C. 7 days D. 10 days 15. A change order is issued which changes the quantities of a material covered by a unit price in the original contract. According to AIA-A201, what price adjustment, if any, can be made? A. the unit price can be adjusted equitably in either the contractor's or owner's favor B. the unit price can only be adjusted jn the owner's favor C. the unit price can only be adjusted in the contractor's favor D. the unit price cannot be adjusted or changed 16. According to the Builder's Guide to Accounting, when estimating job costs, all the following should be included except for. A. labor B. material losses C. fixed overhead D. construction materials 1 Exam Prep Business and Finance Practice Test 4 3

4 17. What portion of the contract documents consist of the written requirements for materials, equipment, construction systems, standards and workmanship for the work, and performance of related services? A. drawings B. specifications C. as-builts D. submittals 18. What can a contractor determine at the break even-point? A. various yields for different types of jobs B. the kind of work that is needed to reach a volume goal C. growth potential D. the least amount of sales needed to break even, assuming costs and expenses remain reasonably constant 19. What is a joint venture? A. a creation by statures for people seeking a profit in a corporation B. any association of two or more entities or persons seeking a profit under a partnership agreement C. two or more entities or persons seeking a profit in a specific ongoing project D. two or more entities or persons seeking a profit with immunity from liability 20. A contractor computes the percentage of gross profit to sales volume over a number of months. The contractor finds that gross profit is decreasing in relationship to sales. Of the factors listed below, which is the most likely explanation? A. not enough volume of work B. sales prices are to high C. lack of control over costs D. material thefts are decreasing 21. According to AIA A401, the contractor must pay the subcontractor each progress payment within how many working days after the contractor receives payment from the owner? A. Day B. 3 days C. 7 days D. 14 days 22. A contractor will complete a project in 2 years. At the end of the first year, annual gross receipts were $8,500,000. What is the amount that the gross receipts for the second year cannot equal or exceed in order to use the completed contract method of accounting? A. $5,000,000 B $6,500,000 C. $10,000,000 D. $11,500,000 1 Exam Prep Business and Finance Practice Test 4 4

5 23. According to AIA-A201, all the following could be cause for an architect to withhold certification of payment except. A. material man filing claims for non-payment B. failure to carry out the work in accordance with the contract documents C. damage done by the owner to the contractor D. defective work not remedied 24. According to Builders Guide to Accounting, which accounting method is the most acceptable for recording income and expenses for large jobs which last longer than one tax year? A. percentage of completion B. completed contract C. combined accounting D. cash accounting 25. According to Contractors Manual, project supplementary general conditions include all the following except. A. site work B. masonry work C. temporary workers D. job surface explorations 26. A bid bond guarantees that when the contract is awarded, the bidder will. A. submit a breakdown of the bid together with a list of subcontractors B. enter into the contract at the bid price C. submit copies of all bid documents for the owner's review D. submit a statement of the contractor's qualifications and past performance 27. A subcontractor has a "Standard Form of Agreement Between Contractor and Subcontractor " with the prime contractor on a project. The subcontractor can terminate the contract in each situation, except A. for non-payment of amounts due for 60 days or longer B. when the contractor and subcontractor cannot settle a controversy or claim C. when the work is stopped for 30 days or longer due to an act of government that is making materials unavailable D. when the work is stopped for 30 days or longer due to the architect not issuing a Certificate for Payment 28. When a change order (which is not a construction change directive or a minor change) is issued, who must sign it? A. the architect only B. the owner and architect only C. the contractor and architect only D. the contractor, owner, and architect 1 Exam Prep Business and Finance Practice Test 4 5

6 29. Billings that have been mailed out by a firm, but for which payment has not been made, are called A. unearned income B. receivable C. deferred income D. accounts payable 30. When determining a bid for a job, which is considered a fixed overhead expense? A. Cod office staff B. materials needed for the job C. purchases of small tools D. rental of equipment to be used only for that job 31. A contractor performed work for the owner of a building knowing the work was contrary to laws, codes, and rules. The contractor did not notify the architect. The engineer worked closely with the architect in producing the plans and specifications. All work was done as per plans and specifications. Who shall assume full responsibility for the work? A. owner B. architect C. engineer D. contractor 32. According to AIA-A201, what is prepared by an architect ordering additional work to a contract that does not require the contractor's signature? A. change order B. construction change directive C. Notice of Commencement D. punch list 33. According to Builder's Guide to Accounting, a valuable method of preparing a cash budget for builders who have wide variations in business volume from month-to-month month is the: A. cash movement method B. percentage of completion method C. capitalized cost method D. source and application of funds method 34. A contract states the contractor will be held liable for all damages suffered due to poor workmanship by the contractor. There is no state law dealing with this situation. Generally, would the contractor's contractual liability insurance pay for the liability the contractor assumed in the contract? A. no, because liability insurance covers only those situations that arise from a duty imposed by law B. only if the contractor has a Completed Operations policy C. yes, because contractual liability insurance provides for all damages D. yes, because the liability arose out of a specific contract signed by the contractor 1 Exam Prep Business and Finance Practice Test 4 6

7 35. When a contract states a completion date, a penalty clause often calls for. A. extra work without compensation B. liquidated damages C. forfeiture of all retainage due D. withholding of funds for work in place 36. According to Contractors Manual, what is the term used when submitting a contract cost breakdown where a higher percentage of estimated cost is added to the early phases of construction and lower percentage is added to the phases near the end, resulting in increased cash flow that aids the contractor in financing of the project? A. one sided contract B. back-end loading C. heavy early-light late D. front-end loading 37. According to AIA-A201, all the following would be considered by the architect when calculating the cost of a change directive, except. A. bond premiums B. hand tool rental costs C. unloading materials cost D. labor fringe benefits 38. What prepared document would contain current information about revenue that is due to a company? A. cash flow statement B. bank balance statement C. aging of accounts receivable D. income statement 39. A lienor, who is a privity lienor, is one. A. whose lien has been filed B. whose lien has been satisfied C. with a direct contract with the owner D. with a contract with other than the owner 40. A lawsuit to claim breach of a written contract must be brought within. A. one year B. three years C. five years D. seven years 1 Exam Prep Business and Finance Practice Test 4 7

8 41. According to Contractors Manual, Type A soils require a maximum allowable slope for excavations less than 20' deep of. A. 3/4:1 B. 1:1 C. 1-1/4:1 D. 1-1/2:1 42. A person may engage in business under a fictitious name by filling out an "Application for Registration of Fictitious Name" and registering the name with the. A. Department of Business and Professional Regulation B. Division of Corporations C. Department of Commerce D. Internal Revenue Service 43. All of the following are considered construction activities as described in the Worker's Compensation statute except. A. architectural work that is included in a construction contract B the manufacturing of materials used in construction work C. landscaping for new construction D. carpet laying in new construction 44. Employers are required by regulation to keep so called "hard records" such as payroll, employment contracts, sales and purchase records for their employees a minimum of. A. 2 years B. 3 years C. 4 years D. 5 years 45. The division of Worker's Compensation does not consider to be a construction business. A. remodeling existing structures B. clearing land construction purposes C. rebuilding existing structures D. well drilling on land with existing buildings 46 A contractor's employee hurt a hand and leg on the job on March 15, causing a loss of 15 work days. What is the latest date that the employee may report the accident to the employer in order to be covered under Workers' Compensation? A. March 22nd B. March 30th C. April 14th D. April 29 th 1 Exam Prep Business and Finance Practice Test 4 8

9 47. Withholding and Social Security are deposited by mail and received by the proper financial institution after the due date. The Internal Revenue Service will consider the deposit to be timely if the employer can prove that the deposit was mailed. A. the date before the due date B. on the due date C. at least 2 days before the due date D. a minimum of 5 days before the due date 48. If the current ratio is too low, it may be raised by. A. converting cash to fixed assets B. retaining profits within the business to buy fixed assets C. replacing short-term borrowing with long-term borrowing D. increasing its operating costs 49. Which type of employer is required to maintain OSHA records? A. a partnership with no employees B. self-employed persons with one or more employees C. employers of household workers D. individuals not classified as "employees" 50. The Americans with Disabilities Act of 1990 (ADA). A. protects employees of an organization from people with disabilities B. protects employers from people with disabilities C. protects employees with disabilities from differential treatment D. protects the public from employers using employees with disabilities 1 Exam Prep Business and Finance Practice Test 4 9

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11 ANSWER KEY 1. D Page 317 Builder's Guide to Accounting 2. C Ch. 3 Florida Contractors Manual 3. D Page 228 Builder's Guide to Accounting 4. C Section AIA Document A C Section AIA Document A B Ch. 10 Florida Contractors Manual 7. D Ch. 3 Florida Contractors Manual 8. B Section AIA Document A D Section 3.4 AIA Document A D Page Florida Contractors Manual 11. C Ch. 3 Florida Contractors Manual 12. B Page 173, 174 Builder's Guide to Accounting 13. C Section AIA Document A C Section 6.2 AIA Document A A Section AIA Document A B Page 227 Builder's Guide to Accounting 17. B Section AIA Document A D Page 178, 179 Builder's Guide to Accounting 19. C Ch. 1 Florida Contractors Manual 20. C Page 272 Builder's Guide to Accounting 21. B Section 11.3 AIA Document A C Page 25 Builder's Guide to Accounting 1 Exam Prep Business and Finance Practice Test 4 11

12 23. C Section AIA Document A A Page 25, 26 & 32 Builder's Guide to Accounting Page 25, completed contract method is used for small jobs. Answer B is eliminated. Page 26, combined accounting method is not recommended for long duration contracts and can complicate record keeping. Answer C is eliminated. Page 32, cash accounting method deals with cash entries only (cash changing hands) and is does not reflect a company's true financial condition. Answer D is eliminated. 25. B Ch. 10, masonry work is not one listed Florida Contractors Manual 26. B Ch. 8 and Ch. 3 Florida Contractors Manual 27. B Section 2.1 AIA Document A401 The subcontractor is bound by the same obligations and responsibilities to the prime contractor as the prime contractor is bound to the owner. Answer A: Answer B: Answer C: Answer D: the subcontractor can terminate the contract according to AIA Document A401, Section Answer A is eliminated. the subcontractor cannot terminate the contract according to AIA Document A401, Section 6.1 & 6.2 because all claims or disputes shall be settled by mediation or arbitration. Answer B is correct. the subcontractor can terminate the contract according to AIA Document A201, Section Answer C is eliminated. the subcontractor can terminate the contract according to MA Document A201, Section & Answer D is eliminated. 28. D Section AIA Document A B Page Ch. 3 Florida Contractors Manual Pages Builder's Guide to Accounting 30. A Page 142 and 143 Builder's Guide to Accounting 31. D Section AIA Document A B Section AIA Document A A Page 176 Builder's Guide to Accounting 34. D Ch. 4 Florida Contractors Manual 1 Exam Prep Business and Finance Practice Test 4 12

13 35. B Page Ch. 3 and Ch. 10 Florida Contractors Manual 36. D Ch. 10 and Ch. 3 Florida Contractors Manual 37. B Section AIA Document A C Page 46 Builder's Guide to Accounting 39. C Ch. 9, Florida Contractors Manual 40. C Ch. 8 Florida Contractors Manual 41. A Ch. 7 Florida Contractors Manual 42. B Ch. 1 Florida Contractors Manual 43. B Ch. 6 Florida Contractors Manual 44. B Ch. 5 Florida Contractors Manual 45. D Ch. 6 Florida Contractors Manual 46. C Ch. 6 Florida Contractors Manual The employee has 30 days to report the injury. March = 31 days - 15 days = 16 days + 14 days (30 days) into April = April 14th 47. C Ch. 3 Circular E, Employer's Tax Guide In Florida Contractors Manual 48. C Page 174, 175 Builder's Guide to Accounting 49. B Ch. 7 Florida Contractors Manual 50. C Ch. 5 Florida Contractors Manual 1 Exam Prep Business and Finance Practice Test 4 13