Prepare for your Contractor Business Law exam with these practice questions and answers. This guide covers construction contracts, mechanic’s liens, licensing requirements, insurance, and liability issues.
Q: If an employer’s Federal Payroll Tax liability is $1000 how may they pay taxes?
Answer: quarterly
Q: How many employees does it take for the Fair Labor Act to be applied?
Answer: 1
Q: What accounting method records income when the service occurs and expense when they are incurred?
Answer: Accrual Method
Q: What do the General Conditions of a contract do?
Answer: Outline roles of the owner, architect, and engineer.
Q: You are purchasing an insurance policy with a monthly premium of $300. If you implement a safety program you can save 10% on the cost of the policy. The safety program costs $400 to start and $15 a month to maintain it. What would be the net difference in cost over three year period with a safety program?
Answer: Net saving of $140
Q: Written construction contract change order should include a description of the modification to be made, any change in contract time and
Answer: The change in the contract dollar amount
Q: Which of the following is a written agreement between the owner and contractor to change the contract?
Answer: change order
Q: What term identifies money withheld from progress payments to the contractor and paid after the completion of the project?
Answer: Retainage
Q: When is final payment due?
Answer: Final inspection, acceptance by owner and submittal of proper documentation must occur
Q: After hiring a disabled person, which of the following can’t you do, according to the American with Disabilities Act?
Answer: Require a medical examination of just the person you suspect is disabled.
Q: The percentage of completion method of accounting does what
Answer: recognizes profit as it is earned
Q: Workers are on a job site where noise is very loud. Who is supposed to supply the workers with ear protection?
Answer: contractor (employer)
Q: Where can you get accurate information about tax deposit schedules?
Answer: IRS Publication Circular E
Q: Which of the following statements correctly describes the cash method of accounting?
Answer: Income / expenses are recorded at the time they are received / paid
Q: What type of workplace insurance provides all the benefits required by law for employees’ who are killed or injured as a result of their employment
Answer: Workers Compensation
Q: If an employee is covered by Workers Compensation in the state of Utah and is doing a job in Colorado and gets injured, are they covered by Utah Workers Compensation?
Answer: Yes, the Utah fund would cover the employee but the employer should look into getting coverage in state of Colorado also.
Q: After the division receives an application for licensure, how many days does the division have to decide whether to issue a license to that applicant?
Answer: 5 days# NASLCA 2nd edition pg E-34 58-55-403
Q: With a Residential Small Commercial license (R100) how many units can build for multi family units?
Answer: a four plex
Q: What will happen to the contractor if he fails to notify the Division of Professional and Occupational Licensing of a disassociation.
Answer: The license will be suspended.
Q: The company’s work site exposes the employees working there to hazardous materials. Who is responsible for making sure each person coming to the site wears the correct protective equipment?
Answer: Employer
Q: Which of the following SHOULD be included for the schedule of progress payments
Answer: date or stage when each payment is due
Q: An employer must submit a completed I-9 form for all employees within how may days of hire date?
Answer: 3 days
Q: Of the following who has the responsibility for material delivery and storage of materials
Answer: expediter
Q: The total time given for the construction of a job is 6 months. The framing is given 2 months to complete. The framing will only take 1 month to complete. What is the amount of float time that is available for the framing?
Answer: 1 month
Q: In which of the contracts does the contractor agree to complete the project for a predetermined, specific price?
Answer: Lump sum
Q: Which of the following is a disadvantage of owning a sole proprietorship?
Answer: unlimited liability
Q: What is the purpose of a mechanics lien?
Answer: To make claim on someone’s property as security against the payment of debt
Q: Indoor and outdoor air quality should be monitored:
Answer: throughout the construction project
Q: What is a survey or quantity take off?
Answer: Complete listing of all materials and items of work needed in the project
Q: Which of the following is a snapshot of a business at any given time?
Answer: Balance Sheet
Q: The responsibilities of the special inspector include all of the following EXCEPT:
Answer: P.O. Box number
Q: Which defines what a current liability is?
Answer: liabilities that will mature and must be paid within one year
Q: A qualifier must prove DOPL that?
Answer: that they have a management position
Q: What are liquidated damages?
Answer: Monetary compensation for loss suffered due to a breach of contract
Q: According to the OSHA which is the most hazardous?
Answer: Lead
Q: Which of the following is not regulated by FLSA?
Answer: Vacation and holiday pay
Q: What type of insurance covers contractors for losses due to vandalism and malicious mischeif?
Answer: All-Risk builders risk
Q: The MAXIMUM allowable time to notify the department of Occupational and Professional Licensing that your qualifier has left the company is:
Answer: 10 days
Q: An employer must determine how much income tax to withhold from each employees wages. What is the document used to determine the amount to be withheld?
Answer: Form W-4
Q: What does Commercial Liability cover?
Answer: Bodily injury, damage or loss of property, personal injury and advertising injury.
Q: If you file a claim or lien on A piece of property, how long do you have to notify the owner or reputed owner
Answer: 30 days
Q: According to Utah Mechanics Lien Laws, when satisfying liens, who would take first priority of payment?
Answer: Laborers who worked on job
Q: How long does form 301 have to be kept?
Answer: 5 years
Q: Which of the following is not considered when determining Project Equipment Cost?
Answer: Payroll
Q: Where would you find information about what to do if an employee swallowed a poisonous substance?
Answer: Material Safety Data Sheet Book
Q: A company will NOT need to file a report for an injury that results in
Answer: Only a minor cut or scratch
Q: Mr. White earns $9.65 per hour and worked 52 hours in one week. What is the total amount that must be withheld for medicare withholding?
Answer: $8.12
Q: If you have a note on a truck that is due to be paid off within the year, this is an example of?
Answer: current liability
Q: Given the following information figure this companies Quick Ratio
Answer: 1.2 ratio
Q: What is the maximum penalty allowed for willful or repeated violations of OSHA standards?
Answer: $70,000
Q: How much time does an employer have to ORALLY report an accident that results in a related fatality?
Answer: 8 hours
Q: By what date must employees send W-2 statements to employees who have had taxes withheld and who are still working for the employer as of December 31st?
Answer: January 31st
Q: Direct costs are those directly linked with a particular project. Which of the following would NOT be considered a direct cost?
Answer: warehouse rental
Q: Which of the following works with the property owner and the subcontractors?
Answer: Project manager
Q: What is the importance of January 31st?
Answer: It is the date employers must send W-2s to employees that have taxes withheld and are working for the employer as of December 31st.
Q: What is the max you can be fined by OSHA for a serious violation?
Answer: $7000
Q: The statement “our company can meet all you specific needs at a discounted price” is considered:
Answer: A negotiation
Q: Which of the following is “unlawful conduct”
Answer: Acting as a contractor when not licensed
Q: The owner refuses payment because a contract is not completed on time due to justifiable unforeseen events and a change order was not submitted. What must the contractor file to receive payment for the work? NOT A CHANGE ORDER.
Answer: A claim.
Q: What is the maximum height of a commercial building that a residential and small commercial contractor can construct?
Answer: three
Q: What document is used to establish employment eligibility?
Answer: I-9
Q: What is used to base a percentage for overhead in a bid?
Answer: Historical data
Q: What is the advantage of operation as a sole proprietorship?
Answer: Owner has total control and decision making responsibility.
Q: A lien is placed on a property, and it was paid so the property can be sold. How many days does the lien holder have to remove it?
Answer: 10 days
Q: What minimum length of time must an employer keep a From I-9 on file?
Answer: 3 years
Q: If you dont carry workers compensation on employees, what is the minimum fine that can be given?
Answer: $1000
Q: What does the Clean Air Act do?
Answer: sets limit on how much pollutant is allowed in the air anywhere in the United States
Q: Which of the following is an advantage of operating a Sole Proprietorship?
Answer: The owner makes all the decisions#NASCLA 2nd Edition pg 2-2
Q: An owner requires a contractor to indemnify the owner for damages of extra costs incurred. If the contractor wants the contract he should?
Answer: have the contract reviewed by an insurance agent
Q: Which is a characteristic of cash based accounting?
Answer: Income is recorded the year it is received
Q: The Miller Act requires contractors to provide performance and payment bonds on public works projects, what is the minimum contract amount to which Miller Act requirements apply?
Answer: $100,000#NASCLA 2nd Edition pg 4-12
Q: The DOPL may revoke, suspend, restrict or place on probation the license of a licensee who is guilty of any on the following except?
Answer: Willfully exceeding normal charges for services
Q: Liens cannot be filed against public property. What type of bond many be purchased to protect subcontractors, vendors and workers seeking to get paid for their work and materials used on a public property project?
Answer: payment bond
Q: In addition to being subject to OSHA safety requiremetns, every employer must maintain records of all occupational injuries and illnesses, regardless of severity, if the company employs a minimum of how many people?
Answer: 11
Q: How do you properly educate your employees on hazardous material
Answer: MSDS
Q: What is issued if changes are made to a bid package before it is due?
Answer: Addendum
Q: A 1120-S form is used with with of the following business entities for filing the companies business income tax returns?
Answer: Sub Chapter S Corporation
Q: What form do you file for FUTA?
Answer: 940
Q: Once you have ____ or more employees you are required to maintain an OSHA safety roster.
Answer: 11
Q: The most common form of water pollution due to construction is
Answer: Sediment
Q: Contractors may be required to be bonded before a project can begin. When required what type of bond is used to guarantee the completion of the project?
Answer: Performance Bond
Q: General costs that are designated for specific job site are considered to be
Answer: project overhead
Q: The licensee or qualified beneficiary shall reimburse the residential lien recovery within how many days?
Answer: 20 days #NASCLA 2nd Edition pg L-13 38-11-207
Q: All of the following are considered source documents in an accounting system EXCEPT:
Answer: Tax Returns
Q: Where must your contractors license be displayed?
Answer: Contract
Q: What is the disadvantage of using a Bar Chart?
Answer: They do not show the inter dependencies of the activities
Q: Which of the following can be performed directly by a Residential/Small Commercial contractor?
Answer: Burglar Alarm
Q: Under the Workers Compensation Law, what the fine for contractors who fail to provide the annual statement?
Answer: $500,00
Q: Construction Contractor’s licenses expire on November 30th of each
Answer: Odd numbered year
Q: Employers who violate the overtime pay requirements are subject to a civil money penalty of up to how much?
Answer: $1,100
Q: If you fail to enforce a lien within the time required, what should you do?
Answer: The lien is automatically void
Q: When posting your summary of work related injuries or illness (form 300A) in the work place, when and how long do you have to get the summary posted?
Answer: February 1st to April 30th
Q: Which of the following makes and asset a current asset?
Answer: assets that can be converted into cash in less than 1 year
Q: What kind of bid states the cost of a project as cost per cubic foot?
Answer: Unit price
Q: Payment from the residence Lien Recovery Fund must not exceed
Answer: $750,000 per residence to all qualified beneficiaries
Q: Income – Cost of Goods Sold =
Answer: Gross Profits
Q: Which of the following is not an integral part of a contract?
Answer: Negotiation
Q: A subcontractor has not been paid on a federal job by XYZ General Contractors. According to the MILLER ACT how long from the completion date of the job must the subcontractor wait before filing a lawsuit against the bond XYZ General Contractors?
Answer: 90 days
Q: What currently is Social Security tax rate?
Answer: 6.2%
Q: An employer fails to provide safety equipment for a project and an employee is injured. What additional percentage of the workers compensation claim is the employee entitled to?
Answer: 15
Q: A claimant in Utah MUST file notice to hold and claim a lien within how many days after a substantial protion of the work is completed in a residence?
Answer: 180 Days
Q: What form shows an employees eligibility to work
Answer: I-9
Q: Which method of estimating consists of listing all materials and labor needed for a project?
Answer: Detailed survey method
Q: Contractor’s license number must be on all of the following except?
Answer: Bank financing agreeements (loan documents)
Q: What is it called if you start on a project without first finishing the plans?
Answer: Fast-Track Construction
Q: Which of the following is NOT considered a fixed asset?
Answer: Franchises
Q: What is the maximum amount per construction can collect when filing a claim with the “Residence Lien Recovery Fund”
Answer: $75,000
Q: An employer is required to work overtime but is not paid for the overtime worked. If the secretary of labor brings suit against the employer what amount can the secretary require the employer to pay?
Answer: Twice the overtime pay
Q: If you have less than $1000.00 in liabilities, when should tax deposits be made?
Answer: annually
Q: Which of the following is the safest contract for a property owner?
Answer: Unit Price
Q: A laborer is NOT considered an employee if you
Answer: Provide a 1099
Q: Which of the following statements correctly describes the cash method of accounting?
Answer: Income/ Expenses are recorded at the time they are earned/ incurred
Q: What is the max percentage fine if Social Security is not paid?
Answer: 100%
Q: A preliminary notice should be filed by a contractor how many days after the commencement of the day of the project?
Answer: 20 days
Q: The difference between a company’s receipts and its disbursements is known as what?
Answer: Cash Flow
Q: The MOST accurate information for controlling the number of hours required to perform a task is by
Answer: job cost controls
Q: What financial condition exists when a companies receipts exceed its disbursements?
Answer: Positive cash flow
Q: If a person has 90 days to file a lien and the lien is field at 91 days what happens?
Answer: The lien may still be filed up to 180 days
Q: Which one of the following is the simplest form of business to set up?
Answer: Sole Proprietorship
Q: When you sell your sole proprietorship business you are actually selling
Answer: the assets of the business
Q: What is the purpose of a bid bond?
Answer: Guarantee that the contractor will abide by the bid
Q: If a contractor voluntary put his license on inactive status, how long does he have to reactivate it without retaking the state exams?
Answer: 6 years
Q: A laborer is NOT considered an employee if you
Answer: Provide a 1099
Q: The difference between a company’s receipts and its disbursements is known as what?
Answer: Cash Flow