Law & Business 1

Question 1

A contractor meets Mr. Jones at his home to discuss remodeling. The contractor and Mr. Jones sign a contract that includes a three-day cancellation form. After the contractor leaves, Mr. Jones decides not to have the work done. Instead of using the cancellation form, Mr. Jones sends the contractor a letter by first-class mail stating that he is canceling the contract. Is Mr. Jones’ cancellation effective?

a. No. Mr. Jones did not return the contract with the letter.
b. No. Mr. Jones did not sign and return the cancellation form.
c. Yes. Mr. Jones’ letter does cancel the contract because it indicates his intention not to be bound by the contract.
d. No. However, the letter would have cancelled the contract had it been sent by certified or registered mail.

Answer 1

c. Yes. Mr. Jones’ letter does cancel the contract because it indicates his intention not to be bound by the contract.

Question 1

To whom do you report and pay sales tax?

a. County Tax Collector
b. Internal Revenue Service
c. Board of Equalization
d. Franchise Tax Board

Answer 1

d. Board of Equalization

Question 2

Where is the “Notice of Right to Cancel” is found on a home improvement contract?

a. at the top of the page
b. near the client signature
c. in the middle of the page
d. on the back

Answer 2

b. near the client signature

Question 3

If a newly hired employee does not have an SSN, what should be done?

a. The employee must apply for an SSN.
b. The employer must apply on behalf of the employee for an SSN.
c. If a W-2 is provided, an SSN is not needed.
d. Call the police.

Answer 3

a. The employee must apply for an SSN.

Question 4

Which of the following may not be deducted from an employee’s paycheck?

a. SDI
b. FICA
c. Medicare tax
d. workers’ compensation insurance premiums

Answer 4

d. workers’ compensation insurance premiums

Question 5

A notice of completion must be recorded within:

a. 10 days after work is completed
b. 10 days after work has ceased
c. 30 days after work is completed
d. 60 days after work has ceased

Answer 5

a. 10 days after work is completed

Question 5

Once a budget is finalized, the:

a. contractor should stick to the budget no matter what happens
b. contractor should do the best possible job of staying within the budget
c. budget should be revised each month
d. budget should be referred to only if the business has cash flow problems

Answer 5

b. contractor should do the best possible job of staying within the budget

Question 5

By law, a “hard laborer” may not be younger than _____ years old.

a. 14
b. 15
c. 16
d. 17

Answer 5

c. 16

Question 5

All of the following are causes for disciplinary action except:

a. allowing your license to be used by an unlicensed contractor
b. entering into a contract with another contractor who is not licensed
c. during bankruptcy, settling obligations incurred as a contractor for less than the full amount owed
d. willful or deliberate failure to pay money when due for materials or services

Answer 5

c. during bankruptcy, settling obligations incurred as a contractor for less than the full amount owed

Question 7

If you are planning to dig, drill, and bore at a job site, you should notify ______ before starting work.

a. DOSH
b. Environmental Protection Agency
c. the County Engineer
d. the regional Underground Service Alert Notification Center

Answer 7

d. the regional Underground Service Alert Notification Center

Question 8

The applicant for a contractor’s license receives a notice from the Contractor’s State Licensing Board, dated October 1, that the applicant passed the written exam. To receive an active license, the applicant must file a license bond and fee no later than:

a. October 31
b. October 29
c. December 30
d. January 1

Answer 8

c. December 30

Question 8

Who pays FUTA?

a. employer
b. employee
c. 50% employer and 50% employee
d. 90% employer and 10% employee

Answer 8

a. employer

Question 9

After a job is completed, the owner decides to have additional work done. How should the contractor proceed?

a. Write a new contract and ask the owner to sign it.
b. Make an oral agreement with the owner.
c. Do the additional work for free.
d. Get the owner to sign a change order.

Answer 9

a. Write a new contract and ask the owner to sign it.

Question 9

An employee works 60 hours in one week. If the hourly wage rate is $12, what are the gross wages?

Question 10

The purpose of a 20-day preliminary notice for private work is to:

a. notify the owner that a lien has been placed on the property
b. notify the owner that the person or firm who sent the notice has improved the property
c. make the owner aware of the provisions of the mechanic’s lien laws
d. waive the contractor’s or subcontractor’s lien rights

Answer 10

b. notify the owner that the person or firm who sent the notice has improved the property

Question 10

By law, a “hard laborer” may not be younger than _____ years old.

a. 14
b. 15
c. 16
d. 17

Answer 10

c. 16 years of age

Question 10

Your accountant advises you to set up a cost management system. What does this system do?

a. It gives a cost history to analyze labor and material costs.
b. It shows where profits and losses are.
c. It shows costs of materials only.
d. It compares what others are charging for subcontracted work.

Answer 10

a. It gives a cost history to analyze labor and material costs.

Question 11

Sometimes contracts can prove to be too vague to interpret without disagreement between owner and contractor. Which of the following steps would best prevent such problems?

a. Walk the job site with the owner.
b. Review the plans and specifications with the owner.
c. Show the owner the critical path schedule.
d. Include a payment schedule in the contract and review other details of the contract with the owner.

Answer 11

b. Review the plans and specifications with the owner.

Question 11

A contractor hires a subcontractor to demolish a concrete wall. Who is responsible for supplying safety goggles?

a. Cal/OSHA
b. subcontractor
c. property owner
d. contractor

Answer 11

b. subcontractor

Question 12

DOSH must investigate a complaint charging a serious violation of health or safety standards within:

a. one working day
b. two working days
c. three working days
d. five calendar days

Answer 12

c. three working days

Question 12

Of the following, which is best for determining the number of hours required for different phases of a project and for making sure the job is on schedule?

a. bar graph and chart
b. cash analysis chart
c. review plans
d. critical path method

Answer 12

d. critical path method

Question 13

You are the qualifier for an active contractor’s license. How do you inactivate the license?

a. Write to the CSLB, requesting that the license be made inactive.
b. Wait to receive the license renewal application and then do not pay the renewal fee.
c. Cancel the contractor’s license bond.
d. Nothing: The license will automatically become inactive when the license term expires.

Answer 13

a. Write to the CSLB, requesting that the license be made inactive.

Question 14

Is it legal for a contractor to require employees to take lie detector tests?

a. It is not legal for the contractor to require lie detector tests, but it would be legal for a federal, state, or local public agency to require lie detector tests of their employees.
b. It is not legal for any employer to require lie detector tests.
c. It is only legal for the contractor to require lie detector tests of employees who have criminal records.
d. It is legal for the contractor to require lie detector tests, but it would not be legal for a federal, state, or local public agency to do so.

Answer 14

a. It is not legal for the contractor to require lie detector tests, but it would be legal for a federal, state, or local public agency to require lie detector tests of their employees.

Question 15

Who must sign a joint control addendum to a home improvement contract?

a. contractor only
b. owner and contractor
c. owner, contractor and Notary Public
d. owner, contractor, and joint control officer

Answer 15

d. owner, contractor, and joint control officer

Question 16

Stuff

If a contractor forgets to renew his or her license on time, the expired license may be renewed any time within _____ after its expiration without reapplying for a license and fulfilling the exam or waiver requirements.

a. one year
b. two years
c. four years
d. five years

Answer 16

d. five years

Question 16

A prime contractor entered into a construction contract with a subcontractor. An employee of the subcontractor was injured, but unfortunately, the subcontractor had not secured workers’ compensation coverage. Which of the following statements best describes the situation, except in cased of fraud?

a. The subcontractor is guilty, but the prime contractor is not responsible.
b. The prime contractor is guilty, but the subcontractor is not responsible.
c. Neither the prime contractor nor the subcontractor are responsible.
d. The subcontractor is guilty, but the prime contractor must take responsibility for the injuries.

Answer 16

d. The subcontractor is guilty, but the prime contractor must take responsibility for the injuries.

Question 17

The CSLB has established a mandatory arbitration program of verified complaints in which the damages are:

a. $1,000 or less
b. $7,500 or less
c. $7,500 or more
d. $5,000 to $20,000

Answer 17

b. $7,500 or less

Question 18

Direct costs are $37,000, overhead is 12%, and profit is 5%. What is the selling price?

a. $39,272.47
b. $41,373.45
c. $43,383.37
d. $44,578.31

Answer 18

d. Sum of overhead and profit percentages = 12% + 5% = 17%
Percent of selling price that is direct costs = 100% - 17% = 83% = .83
Selling price = $37,000 / .83 = $44,578.31
Direct costs = 44,578.31 x .83 = $37,000.00
Overhead = 44,578.31 x .12 = $ 5,349.40
Profit = 44,578.31 x .05 = $ 2,228.92
Total = $44,578.32

Question 19

A contractor and a homeowner sign a home solicitation contract. If the owner lawfully cancels the contract, how long does the contractor have to pick up unused materials that were delivered to the owner’s property?

a. within 24 hours after cancellation
b. within 10 days after cancellation
c. within 20 days after cancellation
d. It’s too late. If the materials are delivered to the property before a notice of cancellation is received, the materials become the property of the owner.

Answer 19

c. within 20 days after cancellation

Question 20

Which would not have to be reported to DOSH immediately or within 24 hours?

a. death from a three-story fall
b. drunken crane operator its a high-voltage power line
c. car accident in which an employee steps onto a public road, gets hit by a car, and suffers a concussion
d. employee falls off forklift and suffers a severe back injury

Answer 20

c. car accident in which an employee steps onto a public road, gets hit by a car, and suffers a concussion

Question 21

Before beginning work, an employer or contractor must inquire whether asbestos is present in any building constructed prior to:

a. 1975
b. 1978
c. 1985
d. 1990

Answer 21

b. 1978

Question 22

When a notice of completion has been filed, the original contractor has ______ days to record a lien.

a. 20
b. 30
c. 60
d. 90

Answer 22

c. 60 days

Question 22

Every employer of ______ or more full- or part-time employees must keep written health and safety records for _____ years.

a. 1 ….. 3
b. 7 ….. 4
c. 10 …. 3
d. 11 …. 5

Answer 22

d. 11 …. 5

Question 22

Who is responsible for checking the site before the building inspector arrives?

a. contractor
b. owner
c. foreperson
d. architect

Answer 22

a. contractor

Question 23

A subcontractor or material supplier has ____ days to file a lien once a notice of completion has been recorded.

a. 10
b. 30
c. 60
d. 90

Answer 23

b. 30 days

Question 24

Of the following, which document is usually delivered first in a transaction involving a home improvement contract?

a. three-day notice of right to cancel
b. the contract
c. “Notice to Owner”
d. 20-day preliminary notice

Answer 24

c. “Notice to Owner”

Question 24

Who would be held responsible if a contractor completes a project according to plans and later discovers that there is a building code violation?

a. contractor
b. architect
c. both the contractor and the architect
d. owner

Answer 24

c. both the contractor and the architect

Question 25

A contractor usually will not be held liable for a suppllier going on strike, but if your supplier did go on strike what would you do?

a. Contact the owner immediately.
b. Contact the architect immediately.
c. Contact the general building contractor immediately.
d. Continue work as usual.

Answer 25

a. Contact the owner immediately.

Question 25

What kind of discount do lumber yards and other suppliers offer to contractors who pay their bills promptly?

a. 1/2% - 1%
b. 1% - 2%
c. 4% - 8%
d. 10% - 12%

Answer 25

b. 1% - 2%

Question 26

How many times may you take the contractor’s license exam before your original application is voided?

a. as many times as necessary within 18 months
b. three times if you conform to scheduling
c. five times
an unlimited number of times

Answer 26

a. as many times as necessary within 18 months

Question 27

You are bidding a job with plans drawn by the owner. You notice a code violation and bring it to the attention of the owner. The owner declines to remedy the code violation and tells you not to worry. What should you do?

a. Bid on the job as though it were to code.
b. Bid on the job as though it were to code, but ask the owner to sign a release of your responsibility.
c. Bid on the job with the corrections in mind, and perform the corrections yourself to bring the work up to code.
d. Decline to bid on the work.

Answer 27

d. Decline to bid on the work.

Question 28

Who pays FICA?

a. employer
b. employee
c. 50% employer and 50% employee
d. 90% employer and 10% employee

Answer 28

c. 50% employer and 50% employee

Question 29

Why would a contractor have a case in Superior Court?

a. if it is transferred from a Small Claims Court
b. if it is transferred from a Municipal Court
c. if it is a dispute of more than $25,000
d. if two or more parties are involved in the case

Answer 29

c. if it is a dispute of more than $25,000

Question 29

John Meyers, a general contractor, had a contract with Mr. and Mrs. Barnes to construct a gazebo and deck in their back yard. John was behind schedule and hired his 18-year-old son, Bart, to help on a part-time basis. After working on the project for a month, Bart slipped on a plank that John had laid across the deck but did not nail securely. As a result of the fall, Bart broke his leg. John is insured for workers’ compensation, but Bart wants to sue his father for negligence in a civil action. Which of the following statements is CORRECT?

a. John is not liable for damages in a civil action because the employee is his son.
b. John is liable for damages in a civil action and must prove that the injury did not result from his negligence.
c. In a civil action, John may use the defense that the injury was the result of the contributory negligence of his son.
d. A civil action is not a possibility when the dispute involves a job-related injury, unless the employer is not insured for workers’ compensation. The case would be handled by the Department of Industrial Relations.

Answer 29

d. A civil action is not a possibility when the dispute involves a job-related injury, unless the employer is not insured for workers’ compensation.

Question 29

When is an employee allowed to view their own personnel file?

a. never
b. when they have a court order
c. whenever they wish
d. during employee evaluations

Answer 29

c. whenever they wish

Question 30

Which of the following procedures BEST ensures error-free bids?

a. working with an attorney
b. having another person draft the bid
c. discussing details of the bid with the supplier
d. rechecking the bid before submitting it to the client

Answer 30

d. rechecking the bid before submitting it to the client

Question 31

What is the most likely reason to lose a bid?

a. 10% added to profit
b. vague specifications
c. prices from subs were not exact
d. costs of materials were not obtained

Answer 31

b. vague specifications

Question 33

A subcontractor who does not serve a preliminary notice:

a. may not sever a stop notice but may file a mechanic’s lien
b. may not file a mechanic’s lien but may serve a stop notice
c. loses both stop notice and mechanic’s lien rights
d. loses nothing because subcontractors are not required to file preliminary notices

Answer 33

c. loses both stop notice and mechanic’s lien rights

Question 34

You have been awarded a job. It requires two days for site preparation and one day for clean-up. The contract involves two separate tasks - one lasting seven days and the other 10 days. If the two tasks can be done simultaneously, for how many days do you schedule the job?

a. 7 days
b. 13 days
c. 15 days
d. 20 days.

Answer 34

b. 13 days

Question 36

Some counties have an additional sales tax added to the base rate. Which of the following is a correct statement regarding this additional tax?

a. This additional tax does not apply to contractors.
b. You do not have to pay this additional tax if your home office is in another county.
c. You may pay the additional tax charged in your county if the rate is lower than the county where the materials were purchased.
d. You must pay the additional tax in the county where the materials were purchased.

Answer 36

d. You must pay the additional tax in the county where the materials were purchased.

Question 37

What happens after an employee’s taxable wages exceed $7,000?

a. After $7,000, the FUTA rate increases.
b. After $7,000, the FUTA rate decreases by 50%.
c. After $7,000, the employer does not pay FUTA.
d. Nothing. FUTA is not subject to a wage limit.

Answer 37

c. After $7,000, the employer does not pay FUTA.

Question 39

On a time and materials job, you should:

a. not charge for profit and overhead
b. add profit and overhead to labor only
c. add profit and overhead to materials only
d. add profit and overhead to labor and materials

Answer 39

d. add profit and overhead to labor and materials

Question 40

All of the following are causes for disciplinary action EXCEPT:

a. allowing your license to be used by an unlicensed contractor
b. entering into a contract with another contractor who is not licensed
c. during bankruptcy, settling obligations incurred as a contractor for less than the full amount
d. willful or deliberate failure to pay money when due for materials or service

Answer 40

c. during bankruptcy, settling obligations incurred as a contractor for less than the full amount is not cause for disciplinary action

Question 41

How often are FICA taxes reported and paid?

a. weekly
b. monthly
c. quarterly
d. yearly

Answer 41

c. quarterly

Question 42

Funds withheld to guarantee completion of a project and correction of defects are called a(n):

a. remainder
b. umbrage
c. retention
d. stipulation

Answer 42

c. retention

Question 43

When balancing the accounts receivable, which of the following would have no effect?

a. Posting to the wrong accounts-receivable account.
b. Crediting instead of debiting the accounts-receivable account.
c. Debiting instead of crediting the accounts-receivable account.
d. Posting a receivable to an accounts-payable account.

Answer 43

a. posting to the wrong accounts-receivable account.

Question 44

How many days does a contractor have to notify the Registrar after being issued a workers’ compensation insurance policy?

a. 5 days
b. 10 days
c. 30 days
d. 90 days

Answer 44

d. 90 days

Question 45

What does it mean when a subcontractor signs a waiver and release form on a public works project?

a. The subcontractor gives up the right to lien the real property.
b. the subcontractor gives up the right to lien the construction funds.
c. The subcontractor waives the right to lien the real property or the construction funds.
d. The subcontractor is no longer responsible for correcting defective work.

Answer 45

b. the subcontractor gives up the right to lien the construction funds.

Question 46

Which of the following is considered a direct cost?

a. telephone use by employees
b. personal vehicle
c. insurance
d. payroll tax

Answer 46

d. payroll tax

Question 47

Is it legal for a contractor to hire professional strikebreakers to replace striking employees?

a. Yes. It is legal to hire professional strikebreakers.
b. No. The contractor is subject to a maximum fine of $500 and/or maximum jail sentence of 30 days.
c. No. The contractor is subject to a maximum fine of $1,000 and/or a maximum jail sentence of 90 days.
d. The contractor has not committed a crime but may be subject to legal action.

Answer 47

c. No. The contractor is subject to a maximum fine of $1,000 and/or a maximum jail sentence of 90 days.

Question 48

Which of the following financial ratios is the strictest measure of liquidity?

a. quick ratio
b. current ratio
c. profitability ratio
d. leverage ratio

Answer 48

a. quick ratio

Question 49

A contractor entered into a home improvement contract for more than $500 with Mrs. Swenson to remodel her kitchen and bathroom. The contract calls for a down payment before work is to begin. According to the Business and Professions Code, how much may the contractor accept from Mrs. Swenson as down payment for the work?

a. The contractor may accept as much as Mrs. Swenson agrees to pay.
b. The down payment is limited to $1,000 or 10% of the total price, whichever is less.
c. The contractor may require enough of a down payment to cover the total cost of materials, but not labor costs.
d. Nothing. The contractor must wait until the work is completed to accept any payment.

Answer 49

b. The down payment is limited to $1,000 or 10% of the total price, whichever is less.

Question 50

When should you let an attorney see a construction contract?

a. Before you let your client see the contract.
b. After the contract is prepared, but before you sign it.
c. After the building permit is obtained.
d. After the contract is signed by you and your client.

Answer 50

b. After the contract is prepared, but before you sign it.

Question 52

How long does a client have to cancel a contract for repairs that are the result of an event for which a State of Emergency was declared?

a. 5 business days
b. 5 calendar days
c. 7 business days
d. 7 calendar days

Answer 52

c. 7 business days

Question 53

The qualifying RME for a construction firm must work at least:

a. 32 hrs per wk or 80% of the work week
b. 30 hrs per wk or 70% of the work week
c. 24 hrs per wk or 65% of the work week
d. 12 hrs per wk or 51% of the work week

Answer 53

a. 32 hrs per wk or 80% of the work week

Question 54

For which of the following would you not obtain a short-term loan?

a. wages
b. bid bond
c. job materials
d. office rent

Answer 54

d. office rent

Question 55

How often are you required to pay sales tax?

a. monthly
b. quarterly
c. annually
d. It depends on the expected amount of sales tax.

Answer 55

b. quarterly

Question 57

When should a contractor renew the contractor’s license bond?

a. the day it expires
b. 10 days before it expires
c. 30 days before it expires
d. within 30 days after it expires

Answer 57

c. 30 days before it expires

Question 58

A mechanic’s lien is a written document that must be signed and verified by the claimant. The first and third steps a contractor should take in filing a lien are listed below: Step 1): Obtain the exact legal description of the property; Step 2): _________; Step 3: Find out if the person requesting the work of improvement is the owner. What is Step 2:

a. Determine the amount of the lien claim.
b. Find out the name of the legal owner of the property as well as the percent of ownership.
c. List the attorney representing the contractor.
d. List the attorney representing the owner.

Answer 58

b. Find out the name of the legal owner of the property as well as the percent of ownership.

Question 60

When you get an approved set of plans, what should you do first?

a. Calculate the square footage.
b. Call a material supplier.
c. Schedule the job.
d. Read any notes from the building department.

Answer 60

d. Read any notes from the building department.

Question 60

You are bidding as a prime contractor on a public works project. The work will not involve construction, improvement, or repair of streets, highways, or bridges. You will use subcontractors for part of the work. If you do not name a subcontractor for any part of the work:

a. the contract is canceled
b. you will do that part of the work yourself
c. you may simply submit a name later
d. the awarding authority will choose a subcontractor for you

Answer 60

b. you will do that part of the work yourself

Question 62

If, during an excavation, you unearth human remains or burial artifacts at a construction site, what should you do?

a. Notify the owner of the property.
b. Stop work and place a warning ribbon three fee from the remains around the perimeter of the site.
c. Stop work immediately at that site.
d. Stop work immediately at that site and any other nearby area that may have remains.

Answer 62

D. Stop work immediately at that site and any other nearby area that may have remains.

Question 63

The supplier of a potentially hazardous product must be able to provide a(n) ____ with that product.

a. Material Safety Data Sheet
b. Certificate for Use
c. Injury Illness and Prevention Program
d. Hazard Evaluation System Information Services bulletin

Answer 63

a. Material Safety Data Sheet

Question 65

When purchasing insurance, what is the best way to choose among different companies?

a. referral
b. cost and coverage
c. location of the company
d. word-of-mouth

Answer 65

b. cost and coverage

Question 67

When a subcontractor does work on a public works contract, the public agency considers the subcontractor to be:

a. an employee of the agency
b. a subcontractor of the agency
c. an employee of the prime contractor
d. a subcontractor of the prime contractor

Answer 67

c. an employee of the prime contractor

Question 69

Harry and Linda have done business as a licensed partnership. If Linda is a general partner, but not the qualifier, what must she do to get an individual license?

a. If Linda was listed as a partner on the license and was actively engaged in the business for at least five of the past seven years, she may apply for a license with a waiver of the exam.
b. If Linda applies for an individual license, the partnership license must be inactivated.
c. Linda is not entitled to apply for an individual license.
d. General partners may automatically receive an individual license if they are listed on the partnership license.

Answer 69

a. If Linda was listed as a partner on the license and was actively engaged in the business for at least five of the past seven years, she may apply for a license with a waiver of the exam.

Question 70

When balancing the accounts receivable, which of the following would have no effect?

a. Posting to the wrong accounts-receivable account.
b. Crediting instead of debiting the accounts-receivable account.
c. Debiting instead of crediting the accounts-receivable account.
d. Posting a receivable to an accounts-payable account.

Answer 70

a. Posting to the wrong accounts-receivable account.

Question 71

The Federal Employer Identification Number (EIN) is issued by the:

a. Franchise Tax Board
b. Board of Equalization
c. Internal Revenue Service
d. Employment Development Department

Answer 71

c. Internal Revenue Service

Question 72

A contractor has had a problem with employees stealing tools and equipment from job sites. When conducting job interviews, may the contractor ask prospective employees about their arrest records?

a. It is legal to ask prospective employees about arrests not leading to convictions.
b. It is not legal to ask prospective employees about arrests not leading to convictions.
c. It is legal for a private employer to ask about arrests not leading to convictions, but it would not be legal for city or county agencies to ask about such arrests.
d. It is legal for a private employer to ask about arrests leading to convictions, but it would not be legal for a federal, state, or local public agency to do so.

Answer 72

b. It is not legal to ask prospective employees about arrests not leading to convictions.

Question 73

You are bidding as a prime contractor on a public works project. The work will not involve construction, improvement, or repair of streets, highways, or bridges. You will use subcontractors for part of the work. If you do not name a subcontractor for any part of the work;

a. the contract is canceled
b. you will do that part of the work yourself
c. you may simply submit a name later
d. the awarding authority will choose a subcontractor for you

Answer 73

b. you will do that part of the work yourself

Question 75

Business records must be kept and made available for inspection by the Registrar of Contractors for a period of ____ after completion of a construction project or operation.

a. one year
b. two years
c. three years
d. five years

Answer 75

d. five years

Question 76

Your employee sets a cabinet wrong. The cabinet falls from the wall and damages the client’s counter top. What should you do?

a. Claim the damage on your general liability insurance policy.
b. Require the employee to pay for the damage to the counter top.
c. Tell the client to claim the damaged counter top on his or her homeowner’s insurance policy.
d. No action is required. The client must assume the risk of damage.

Answer 76

a. Claim the damage on your general liability insurance policy.

Question 77

What possible reason would an owner for requiring an unconditional lien release from a subcontractor?

a. The lien release protects the prime contractor.
b. A lien release informs the owner of progress on the job.
c. A lien release provides for rights of cancellation.
d. The owner’s property covered by the release may not be liened.

Answer 77

d. The owner’s property covered by the release may not be liened.

Question 79

A contractor, on his own initiative, changed the design of a building and carried out the change. The owner rejected the change and stated that the building has lost market value. If the owner takes the contractor to court and obtains a favorable judgement, the owner is:

a. due the cost of repairs or the loss of market value
b. due any loss of profits
c. entitled to a new building
d. due only the loss of market value

Answer 79

a. due the cost of repairs or the loss of market value

Question 80

Which of the following statements about home improvement laws is NOT correct?

a. A subcontractor may give a salesperson a bonus.
b. A general contractor may give a sales person a bonus.
c. A subcontractor may not give the general contractor a bonus.
d. The homeowner may give the salesperson a bonus.

Answer 80

d. The homeowner may give the salesperson a bonus.

Question 81

A(n) _____ summarizes revenues, costs of sales, and operating expenses over a period of time.

a. profit plan
b. balance sheet
c. cash flow statement
d. income statement

Answer 81

d. income statement

Question 83

After you have read the plans and specifications, what is the next important step in writing a bid?

a. Talk to and select subs.
b. Walk the job.
c. Call about materials, price and availability.
d. Talk to the crew leader about labor.

Answer 83

b. Walk the job.

Question 84

Which act establishes the rights of workers to organize into unions and negotiate contracts?

a. Civil Rights Act of 1964
b. Civil Rights Act of 1972
c. Civil Rights Act of 1984
d. National Labor Relations Act of 1935

Answer 84

d. National Labor Relations Act of 1935

Question 86

You are the qualifier for an active contractor’s license. How do you inactivate the license?

a. Write to the CSLB, requesting that the license be made inactive.
b. Wait to receive the license renewal application and then do not pay the renewal fee.
c. Cancel the contractor’s license bond.
d. Nothing. The license will automatically become inactive when the license term expires.

Answer 86

a. Write to the CSLB, requesting that the license be made inactive.

Question 87

Is it legal for a contractor to pay employees in cash?

a. Yes, if the contractor provides each employee with a wage deduction statement semimonthly or at the time of each wage payment.
b. Yes, if the contractor provides each employee with Form W-2 at the end of the year.
c. No, because an employee’s wages must be paid by a check with a wage deduction statement attached.
d. No, unless the contractor obtains a receipt from each employee showing the amount of gross wages received.

Answer 87

a. Yes, if the contractor provides each employee with a wage deduction statement semimonthly or at the time of each wage payment.

Question 88

A notice of completion must be recorded within:

a. 10 days after work is completed
b. 10 days after work is ceased
c. 30 days after work is completed
d. 60 days after work is ceased

Answer 88

a. 10 days after work is completed

Question 90

When an owner signs a receipt for a stop notice, it usually means the owner:

a. owes money to the contractor for labor and materials
b. recognizes that work will stop in 30 days
c. owes the sub money
d. recognizes that a lien could be placed on funds

Answer 90

d. recognizes that a lien could be placed on funds

Question 91

If required safety devices are missing from tools, what should an employee do?

a. Notify the contractor, who is responsible for safety.
b. Notify the property owner, who is responsible for safety.
c. Safety devices are the employee’s responsibility.
d. Call Cal/OSHA

Answer 91

a. notify the contractor, who is responsible for safety.

Question 92

When is the last day a customer can cancel a contract that was signed on Friday, December 21st?

a. the following Friday
b. the following Tuesday
c. the following Wednesday
d. the following Thursday

Answer 92

c. the following Wednesday; customer has 3 business days to cancel a contract.

Question 93

As required by the immigration reform act, all employees hired on or after November 7, 1986 must complete Form ______ to verify their employment eligibility status.

a. I-9
b. W-4
c. US- 99
d. N-14

Answer 93

a. I-9

Question 94

Construction or alteration of any building, highway, excavation, or other structure in the State of California requires a contractor’s license if the total cost of one or more contracts on the project is:

a. $150 or more in labor only
b. $200 or more in materials only
c. $500 or more in labor and materials
d. $500 or more in labor only

Answer 94

c. $500 or more in labor and materials

Question 95

An employee worked 60 hours in one week. If the hourly wage rate is $12, what are the gross wages?

a. $600
b. $840
c. $960
d. $1,080

Answer 95

b. $840
Gross wages = Regular Time + Overtime
Regular Time = 40 hrs x $12/hr = $480
Overtime = 20 hrs x 1.5 x $12/hr = $360
Gross Wages = $480 + $360 = $840

Question 97

If a sales presentation is made in Spanish, the home solicitation contract:

a. must be in Spanish
b. may be in English if the writing is plain and simple
c. must be co-signed by an English-speaking person if the contract is in English
d. must be translated into English and notarized

Answer 97

a. must be in Spanish

Question 98

An employer remits State income tax and State disability taxes withheld from an employee’s wages to what agency?

a. Internal Revenue Service
b. Employment Development Department
c. Franchise Tax Board
d. Board of Equalization

Answer 98

b. Employment Development Department

Question 99

A contractor is looking for an insurance policy to cover a high degree of exposure to risk. Of the following, which policy would be best for this purpose?

a. property
b. general liability
c. builder’s risk
d. umbrella

Answer 99

d. umbrella

Question 101

A(n) _____ represents a company’s financial position on a specified date.

a. balance sheet
b. income statement
c. cash flow statement
d. profit plan

Answer 101

a. balance sheet

Question 102

An employer must furnish an employee with a completed IRS Form W-2 (Wage and Tax Statement) by:

a. January 1
b. January 31
c. April 15
d. the final day of employment

Answer 102

b. January 31

Question 103

What is the maximum allowed travel distance from any point of a work area to a fire extinguisher?

a. 25 feet
b. 50 feet
c. 75 feet
d. 150 feet

Answer 103

c. 75 feet

Question 104

How often are you required to pay sales tax?

a. monthly
b. quarterly
c. annualy
d. It depends on the expected amount of taxable sales.

Answer 104

d. It depends on the expected amount of taxable sales.

Question 105

Insured employers must report every work-related illness or injury to their workers’ compensation carrier within ____ of the incident.

a. 24 hours
b. 2 days
c. 5 days
d. 10 days

Answer 105

c. 5 days

Question 106

As part of the safety training process, contractors’ supervisors are required to conduct “toolbox” or “tailgate” safety meetings. How often must these meetings be held?

a. daily
b. at least once every ten working days
c. at least once a month
d. at least once a quarter

Answer 106

b. at least once every ten working days

Question 107

Ms. Gomez applies for a job. Of the following, the only reason an employer may lawfully deny her employment is:

a. she is over 50 years of age
b. she is Hispanic and everyone else is African-American or Caucasian.
c. lifting is involved and she is a woman
d. she has no work experience or Social Security number

Answer 107

d. she has no work experience or Social Security number

Question 108

A general contractor has obtained bids from several subcontractors for a private project. He notices that one bid is substantially lower than the rest. Is it ethical and a good business practice for this contractor to inform the subcontractor that the bid is substantially lower than the bids of the other subcontractors?

a. No. It would be unethical for the contractor to inform any subcontractor that their bid is substantially lower than the other bids, even if the contractor believes that the subcontractor has made an error.
b. Yes. If the contractor believes that the subcontractor has made an error in compiling his bid, the contractor should disclose the amounts of the other subcontractors’ bids to the subcontractor, so the subcontractor can determine the extent of his error.
c. Yes. If the contractor has reason to believe that the subcontractor has made an error in preparing his bid, the contractor should notify the subcontractor of the apparent error, but the contractor may not disclose the amounts of the other bids.
d. None of the above.

Answer 108

c. Yes. If the contractor has reason to believe that the subcontractor has made an error in preparing his bid, the contractor should notify the subcontractor of the apparent error, but the contractor may not disclose the amounts of the other bids.

Question 109

Which of the following is considered a direct cost?

a. telephone use by employees
b. personal vehicle
c. insurance
d. payroll tax

Answer 109

d. payroll tax

Question 110

Which of the following financial ratios is the strictest measure of liquidity?

a. quick ratio
b. current ratio
c. profitability ratio
d. leverage ratio

Answer 110

a. quick ratio

Question 111

Your employee sets a cabinet wrong. The cabinet falls from the wall and damages the client’s counter top. What should you do?

a. Claim the damage on your general liability insurance policy.
b. Require the employee to pay for the damage to the counter top.
c. Tell the client to claim the damaged counter top on his or her homeowner’s insurance policy.
d. No action is required: The client must assume the risk of damage.

Answer 111

a. Claim the damage on your general liability insurance policy.

Question 112

What is the most likely reason to lose a bid?

a. 10% added to profit
b. vague specifications
c. prices from subs were not exact
d. costs of materials were not obtained

Answer 112

b. vague specifications

Question 113

When purchasing insurance, what is the best way to choose among different companies?

a. referral
b. cost and coverage
c. location of company
d. word-of-mouth

Answer 113

b. cost and coverage

Question 114

Some counties have an additional sales tax added to the base rate. Which of the following is a correct statement regarding this additional tax?

a. This additional tax does not apply to contractors.
b. You do not have to pay this additional tax if your home office is in another county.
c. You may pay the additional tax charged in your county if the rate is lower than the county where the materials were purchased.
d. You must pay the additional tax in the county where the materials were purchased.

Answer 114

d. You must pay the additional tax in the county where the materials were purchased.

Question 115

Of the following, which document is usually delivered first in a transaction involving a home improvement contract?

a. three-day notice of right to cancel
b. Contract
c. Notice to Owner
d. all of the above

Answer 115

d. all of the above

Question 116

Funds withheld to guarantee completion of a project and correction of defects are called a(n):

a. remainder
b. unberage
c. retention
d. stipulation

Answer 116

c. retention

Question 117

Once a budget is finalized, the:

a. contractor should stick to the budget no matter what happens
b. contractor should do the best possible job of staying within the budget
c. budget should be revised each month
d. budget should be referred to only if the business has cash flow problems

Answer 117

b. contractor should do the best possible job of staying within the budget

Question 118

Which of the following statements about home improvement laws is (“most correct”)

a. A subcontractor may give a salesperson a bonus.
b. A general contractor may give a salesperson a bonus.
c. A subcontractor may not give the general contractor a bonus.
d. The homeowner may give the salesperson a bonus.

Answer 118

d. The homeowner may give the salesperson a bonus.

Question 119

A contractor meets Mr. Jones at his home to discuss remodeling. The contractor and Mr. Jones sign a contract that includes a three-day cancellation form. After the contractor leaves, Mr. Jones decides not to have the work done. Instead of using the cancellation form, Mr. Jones sends the contractor a letter by first-class mail stating that he is canceling the contract. Is Mr. Jones’ cancellation effective?

a. No. Mr. Jones did not return the contract with the letter.
b. No. Mr. Jones did not sign and return the cancellation form.
c. Yes. Mr. Jones’ letter does cancel the contract because it indicates his intention not to be bound by the contract.
d. No. However, the letter would have canceled the contract had it been sent by certified or registered mail.

Answer 119

c. Yes. Mr. Jones’ letter does cancel the contract because it indicates his intention not to be bound by the contract.

Question 120

When you get an approved set of plans, what should you do first?

a. Calculate the square footage.
b. Call a material supplier.
c. Schedule the job.
d. Read any notes from the building department.

Answer 120

d. Read any notes from the building department.

Question 121

A prime contractor entered into a construction contract with a subcontractor. An employee of the subcontractor was injured, but unfortunately the subcontractor had not secured workers’ compensation coverage. Which of the following statements best describes the situation, except in cases of fraud?

a. The subcontractor is guilty, but the prime contractor is not responsible.
b. The prime contractor is guilty, but the subcontractor is not responsible.
c. Neither the prime contractor nor the subcontractor are responsible.
d. The subcontractor is guilty, but the prime contractor must take responsibility for the injuries.

Answer 121

d. The subcontractor is guilty, but the prime contractor must take responsibility for the injuries.

Question 122

A subcontractor or material supplier has _____ days to file a lien once a notice of completion has been recorded.

a. 10
b. 30
c. 60
d. 90

Answer 122

b. 30

Question 123

Your accountant advises you to set up a cost management system. What does this system do?

a. It gives a cost history to analyze labor and material costs.
b. It shows where profits and losses are.
c. It shows costs of materials only.
d. It compares what others are charging for subcontracted work.

Answer 123

a. It gives a cost history to analyze labor and material costs.

Question 124

Harry and Linda have done business as a licensed partnership. If Linda is a general partner, but not the qualifier, what must she do to get an individual license?

a. If Linda was listed as a partner on the license and was actively engaged in the business for at least five of the past seven years, she may apply for a license with a waiver of the exam.
b. If Linda applies for an individual license, the partnership license must be inactivated.
c. Linda is not entitled to apply for an individual license.
d. General partners may automatically receive an individual license if they are listed on the partnership license.

Answer 124

a. If Linda was listed as a partner on the license and was actively engaged in the business for at least five of the past seven years, she may apply for a license with a waiver of the exam.

Question 125

The purpose of a 20-day preliminary notice for private work is to:

a. notify the owner that a lien has been placed on the property
b. notify the owner that the person or firm who sent the notice has improved the property
c. make the owner aware of the provisions of the mechanics’ lien laws
d. waive the contractor’s or subcontractor’s lien rights

Answer 125

b. notify the owner that the person or firm who sent the notice has improved the property

Question 126

Construction or alteration of any building, highway, excavation, or other structure in the State of California requires a contractor’s license if the total cost of one or more contracts on the project is:

a. $150 or more in labor only
b. $200 or more in materials only
c. $500 or more in labor and materials
d. $500 or more in labor only

Answer 126

c. $500 or more in labor and materials

Question 127

Insured employers must report every work-related illness or injury to their workers’ compensation carrier within _____ of the incident.

a. 24 hours
b. 2 days
c. 5 days
d. 10 days

Answer 127

c. 5 days

Question 128

An employer must furnish an employee with a completed IRS Form W-2 (Wage and Tax Statement) by:

a. 1-Jan
b. 31-Jan
c. 15-Apr
d. Final day of employment

Answer 128

b. 31-Jan

Question 129

Business records must be kept and made available for inspection by the Registrar of Contractors for a period of _____ after completion of a construction project or operation.

a. one year
b. two years
c. three years
d. five years

Answer 129

d. five years

Question 130

Is it legal for a contractor to require employees to take lie detector tests?

a. It is not legal for the contractor to require lie detector tests, but it would be legal for a federal, state, or local public agency to require lie detector tests of their employees.
b. It is not legal for any employer to require lie detector tests.
c. It is only legal for the contractor to require lie detector tests of employees who have criminal records.
d. It is legal for the contractor to require lie detector tests, but it would not be legal for a federal, state, or local public agency to do so.

Answer 130

a. It is not legal for the contractor to require lie detector tests, but it would be legal for a federal, state, or local public agency to require lie detector tests of their employees.

Question 131

How often are FICA taxes reported and paid?

a. weekly
b. monthly
c. quarterly
d. yearly

Answer 131

c. quarterly

Question 132

An employer remits State disability taxes withheld from an employee’s wages to what agency?

a. Internal Revenue Service
b. Employment Development Department
c. Franchise Tax Board
d. Board of Equalization

Answer 132

b. Employment Development Department

Question 133

A general contractor has obtained bids from several subcontractors for a private project. He notices that one bid is substantially lower than the rest. Is it ethical and a good business practice for this contractor to inform the subcontractor that the bid is substantially lower than the bids of the other subcontractors?

a. No. It would be unethical for the contractor to inform any subcontractor that their bid is substantially lower than the other bids, even if the contractor believes that the subcontractor has made an error.
b. Yes. If the contractor believes that the subcontractor has made an error in compiling his bid, the contractor should disclose the amounts of the other subcontractors’ bids to the subcontractor, so the subcontractor can determine the extent of his error.
c. Yes. If the contractor has reason to believe that the subcontractor has made an error in preparing his bid, the contractor should notify the subcontractor of the apparent error, but the contractor may not disclose the amounts of the other bids.
d. None of the above.

Answer 133

c. Yes. If the contractor has reason to believe that the subcontractor has made an error in preparing his bid, the contractor should notify the subcontractor of the apparent error, but the contractor may not disclose the amounts of the other bids.

Question 134

Which act establishes the rights of workers to organize into unions and negotiate contracts?

a. Civil Rights Act of 1964
b. Civil Rights Act of 1972
c. Civil Rights Act of 1984
d. National Labor Relations Act of 1935

Answer 134

d. National Labor Relations Act of 1935

Question 135

You are bidding on a job with plans drawn by the owner. You notice a code violation and bring it to the attention of the owner. The owner declines to remedy the code violation and tells you not to worry. What should you do?

a. Bid on the job as though it were to code.
b. Bid on the job as though it were to code, but ask the owner to sign a release of your responsibility.
c. Bid on the job with the corrections in mind, and perform the corrections yourself to bring the work up to code.
d. Decline to bid on the work.

Answer 135

d. Decline to bid on the work.

Question 136

Is it legal for a contractor to pay employees in cash?

a. Yes, if the contractor provides each employee with a wage deduction statement semimonthly or at the time of each wage payment.
b. Yes, if the contractor provides each employee with Form W-2 at the end of the year.
c. No, because an employee’s wages must be paid by a check with a wage deduction statement attached.
d. No, unless the contractor obtains a receipt from each employee showing the amount of gross wages received.

Answer 136

a. Yes, if the contractor provides each employee with a wage deduction statement semimonthly or at the time of each wage payment.

Question 137

A mechanics’ lien is a written document that must be signed and verified by the claimant. The first and third steps a contractor should take in filing a lien are listed below. Step 1: Obtain the exact legal description of the property. Step 2: Step 3: Find out if the person requesting the work of improvement is the owner. What is Step 2?

a. Determine the amount of the lien claim.
b. Find out the name of the legal owner of the property as well as the percent of ownership.
c. List the attorney representing the contractor.
d. List the attorney representing the owner.

Answer 137

b. Find out the name of the legal owner of the property as well as the percent of ownership.

Question 138

Is it legal for a contractor to hire professional strikebreakers to replace striking employees?

a. Yes. It is legal to hire professional strikebreakers.
b. No. The contractor is subject to a maximum fine of $500 and/or a maximum jail sentence of 30 days.
c. No. The contractor is subject to a maximum fine of $1,000 and/or a maximum jail sentence of 90 days.
d. The contractor has not committed a crime but may be subject to legal action.

Answer 138

c. No. The contractor is subject to a maximum fine of $1,000 and/or a maximum jail sentence of 90 days.

Question 139

The CSLB has established a mandatory arbitration program of verified complaints in which the damage is:

a. $1,000 or less
b. $12,500 or less
c. $7,500 or more
d. $5,000 to $20,000

Answer 139

b. $12,500 or less

Question 140

The qualifying RME for a construction firm must work at least:

a. 32 hr per week or 80% of the work week
b. 30 hr per week or 70% of the work week
c. 24 hr per week or 65% of the work week
d. 12 hr per week or 51% of the work week

Answer 140

a. 32 hr per week or 80% of the work week

Question 141

If, during excavation, you unearth human remains or burial artifacts at a construction site, what should you do?

a. Notify the owner of the property.
b. Stop work and place a warning ribbon three feet from the remains around the perimeter of the site.
c. Stop work immediately at that site.
d. Stop work immediately at that site and any other nearby area that may have remains.

Answer 141

d. Stop work immediately at that site and any other nearby area that may have remains.

Question 142

A(n) _____ summarizes revenues, cost of sales, and operating expenses over a period of time.

a. profit plan
b. balance sheet
c. cash flow statement
d. income statement

Answer 142

d. income statement

Question 143

When a subcontractor does work on a public works contract, the public agency considers the subcontractor to be:

a. an employee of the agency
b. a subcontractor of the agency
c. an employee of the prime contractor
d. a subcontractor of the prime contractor

Answer 143

d. a subcontractor of the prime contractor

Question 144

An applicant for a contractor’s license receives a notice from the Contractors’ State License Board, dated October 1, that the applicant passed the written exams. To receive an active license, the applicant must file a license bond and fee no later than:

a. 31-Oct
b. 29-Oct
c. 30-Dec
d. 1-Jan

Answer 144

c. 30-Dec

Question 145

A subcontractor who does not serve a preliminary notice:

a. may not serve a stop notice but may file a mechanics’ lien
b. may not file a mechanics’ lien but may serve a stop notice
c. loses both stop notice and mechanics’ lien rights
d. loses nothing because subcontractors are not required to serve preliminary notices

Answer 145

c. loses both stop notice and mechanics’ lien rights

Question 146

To whom do you report and pay sales tax?

a. County Tax Collector
b. Internal Revenue Service
c. Board of Equalization
d. Franchise Tax Board

Answer 146

c. Board of Equalization

Question 147

After you have read the plans and specifications, what is the next important step in writing a bid?

a. Talk to and select subs.
b. Walk the job.
c. Call about materials, price, and availability.
d. Talk to the crew leader about labor.

Answer 147

b. Walk the job.

Question 148

Which of the following procedures BEST ensures error-free bids?

a. working with an attorney
b. having another person draft the bid
c. discussing details of the bid with the supplier
d. rechecking the bid before submitting it to the client

Answer 148

d. rechecking the bid before submitting it to the client

Question 149

What possible reason would an owner have for requiring an unconditional lien release from a subcontractor?

a. The lien release protects the prime contractor.
b. A lien release informs the owner of progress on the job.
c. A lien release provides for rights of cancellation.
d. The owner’s property covered by the release may not be liened.

Answer 149

d. The owner’s property covered by the release may not be liened.

Question 150

If required safety devices are missing from tools, what should an employee do?

a. Notify the contractor, who is responsible for safety.
b. Notify the property owner, who is responsible for safety.
c. Safety devices are the employee’s responsibility.
d. Call Cal/OSHA.

Answer 150

a. Notify the contractor, who is responsible for safety.

Question 151

How long does a client have to cancel a contract for repairs that are the result of an event for which a State of Emergency was declared?

a. 5 business days
b. 5 calendar days
c. 7 business days
d. 7 calendar days

Answer 151

c. 7 business days

Question 152

On a time-and-materials job, you should:

a. not charge for profit and overhead
b. add profit and overhead to labor only
c. add profit and overhead to materials only
d. add profit and overhead to labor and materials

Answer 152

d. add profit and overhead to labor and materials

Question 153

When an owner signs a receipt for a stop notice, it usually means the owner:

a. owes money to the contractor for labor and materials
b. recognizes that work will stop in 30 days
c. owes the sub money
d. recognizes that a lien could be placed on funds

Answer 153

d. recognizes that a lien could be placed on funds

Question 154

John Meyers, a general contractor, had a contract with Mr. and Ms. Barnes to construct a gazebo and deck in their back yard. John was behind schedule and hired his 18-year-old son, Bart, to help on a part-time basis. After working on the project for a month, Bart slipped on a plank that John had laid across the deck but did not nail securely. As a result of the fall, Bart broke his leg. John is insured for workers’ compensation, but Bart wants to sue his father for negligence in a civil action. Which of the following statements is CORRECT?

a. John is not liable for damages in a civil action because the injured employee is his son.
b. John is liable for damages in a civil action and must prove that the injury did not result from his negligence.
c. In a civil action, John may use the defense that the injury was the result of the contributory negligence of his son.
d. A civil action is not a possibility when the dispute involves a job-related injury, unless the employer is not insured for workers’ compensation. This case would be handled by the Department of Industrial Relations.

Answer 154

d. A civil action is not a possibility when the dispute involves a job-related injury, unless the employer is not insured for workers’ compensation. This case would be handled by the Department of Industrial Relations.

Question 155

Before beginning work, an employer or contractor must inquire whether asbestos is present in any building constructed prior to:

a. 1975
b. 1978
c. 1985
d. 1990

Answer 155

b. 1978

Question 156

A contractor usually will not be held liable for a supplier going on strike, but if your supplier did go on strike what should you do?

a. Contact the owner immediately.
b. Contact the architect immediately.
c. Contact the general building contractor immediately.
d. Continue work as usual.

Answer 156

a. Contact the owner immediately.

Question 157

Sometimes contracts can prove to be too vague to interpret without disagreement between owner and contractor. Which of the following steps would best prevent such problems?

a. Walk the job site with the owner.
b. Review the plans and specifications with the owner.
c. Show the owner the critical path schedule.
d. Include a payment schedule in the contract and review other details of the contract with the owner.

Answer 157

b. Review the plans and specifications with the owner.