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CSLB CONTRACTOR'S LAW AND BUSINESS EXAM LATEST VERSION
WITH 250 ACTUAL EXAM QUESTIONS AND CORRECT ANSWERS WITH
RATIONALES (100% VERIFIED CORRECT ANSWERS) NEWEST
The qualifying RME for a construction firm must work at least: - A qualifying RME for a construction firm must work at least 32 hours per week or 80% of the work week. The federal Employer Identification Number (EIN) is issued by the: - The Internal Revenue Service 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 - Every employer of 11 or more full or part time employees must keep written health and safety records for 5 years. 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. - Walk the job. 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 cashflow problems. - The contractor should do the best possible job of staying within budget. ` How many times may you take the contractors license exam before your original application is voided? - As many times as necessary within 18 months. When should a contractor renew the contractor's license bond? - 30 days before it expires.
Who must sign a joint control addendum to a home improvement contract? - Owner, contractor, and joint control officer. When purchasing insurance, what is the best way to chose among different companies?
- Cost and Coverage 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. - Review the plans and specifications with the owner. When an owner signs a receipt for a stop notice, it usually means the owner: - The owner recognizes that a lien could be placed on funds. To whom do you report and pay sales tax? - The Board of Equalization DOSH must investigate a complaint charging a serious violation of health or safety standards within: - DOSH must investigate a complaint charging a serious violation of health or safety standards within two working days. By law, a "hard laborer" may not be younger than ______ years old. - A hard laborer may not be younger than 16 years old. When is the last day a customer can cancel a contract that was signed on Friday, December 21st? - The following Wednesday. The customer has the right to cancel 3 business days after the day the contract has been signed and delivered to the. In this case: Saturday Midnight day one. Monday midnight day two Wednesday Midnight day three. NOTE: Sunday and Tuesday were not business days since Tuesday was a holiday. Correct answer is Wednesday midnight. When a notice of completion has been filed, the original contractor has how many days to record a lien. - 60 days to record a lien. Which of the following financial ratios is the strictest measure of liquidity? A. Quick Ratio
A. Death from a three-story fall. B. Drunken crane operator hits 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 sever back injury. - Car accident in which an employee steps onto a public road, gets hit by a car, and suffers a concussion. 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? - 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. An employer must furnish an employee with a completed IRS Form W-2 (Wage and Tax Statement) by: - The 31st of January. After a job is completed, the owner decides to have additional work done. How should the contractor proceed? - Write a new contract and ask the owner to sign it. The purpose of a 20-day preliminary notice for private work is to? - Notify the owner that the person or firm who sent the notice has improved the property. Is it legal for a contractor to pay employees in cash? - Yes, if the contractor provides each employee with a wage deduction statement semimonthly or at the time of each wage payment. 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? - Decline to bid the work. On a time-and-materials job, you should: - Add profit and overhead to labor and materials 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 countertop. 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. - Claim the damage on your general liability insurance policy. 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 - The critical path method. Is it legal for a contractor to require employees to take a lie detector test? - 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. If a newly hired employee does not have a SSN, what should be done? - The employee must apply for a SSN. Funds withheld to guarantee completion of a project and correction of defects are called a(n): - Retention Direct costs are $37,000, overhead is 12% and profit is 5%. What is the selling price? - $44,578. Add the 12% overhead and 5% profit together, then subtract that from 100% (83%). Then divide the total direct cost ($37,000) by the remaining percentage (83%) = 445.7831. 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? - Find out the name of the legal owner of the property as well as the percent of ownership. A mechanics' lien. Step 1: Obtain the exact legal description of the property. Step 2: Find out the name of the legal owner of the property as well as the percent of ownership. Step 3: Find out if the person requesting the work of improvement is the owner.
What is the maximum allowed travel distance from any point of a work area to a fire extinguisher "Class "A"? - 75 Feet The CSLB has established a mandatory arbitration program of verified companies in which the damage is: - $12,500 or less. A contractor usually will not be held liable for a supplier going on strike, but if your supplier did go on strike what would you do? - Contact the owner immediately. When you get an approved set of plans, what should you do first? - Read any notes from the building department. 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 - A balance sheet. You are the qualifier for an active contractor's license. How do you inactivate the license? - Write to CSLB, requesting that the license be made inactive. 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. - You will do that part of the work yourself. 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- yearold 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 - 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. 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: - December 30th. You have 60 days to file a license bond. If an owner lawfully cancels a contract, how long does the contractor have to pick up previously delivered materials? 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 property of the owner. - If an owner lawfully cancels a contract, the contractor has 20 days to pick up previously delivered materials. Who is responsible for checking the site before the building inspector arrives? - The contractor is responsible for checking the site before the inspector arrives. When is an employee allowed to view their own personnel file? - When ever they wish to. 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. - Material Safety Data Sheet
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. - The subcontractor is guilty, but the prime contractor must take responsibility for the injuries. Your accountant advises you to set up a cost management system. What does a cost management system do? - A cost management system gives a cost history to analyze labor and material costs. before beginning work, an employer or contractor must inquire whether asbestos is present in any building constructed prior to: - 1978 What does it mean when a subcontractor signs a waiver and release form on a public works project? - The subcontractor gives up the right to lien the construction funds. A contractor is looking for an insurance policy to cover a high degree of exposure to risk. Of the following, which policy would be the best for this purpose? A. Property B. General Liability C. Builder's Risk D. Umbrella - Umbrella policy. But the umbrella policy would only cover the high degree of exposure if it was covered by one of the underlying policies. Which of the following is considered a direct cost? A. Telephone use by employees B. Personal Vehicle C. Insurance. D. Payroll Tax - Payroll tax is considered a direct cost. How many days does a contractor have to notify the Registrar after being issued a workers' compensation insurance policy? - A contractor has 90 days to notify the Registrar after being issued a workers' compensation insurance policy.
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. - Posting to the wrong accounts-receivable account. What kind of discount do lumber yards and other supplies offer to contractors who pay their bill promptly? - 1%-2% discount. 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 - The "Notice to Owner" At the time this question was written, the "Notice to Owner" was required to be given to the client "prior to entering into a contract with an owner for work specified as home improvement or swimming pool construction." Since then, several of the consumer protection laws covering Home Improvement Contracts have been revised to make them easier for the average homeowner to understand. The "Mechanics Lien Warning" has replaced the "Notice to Owner" and is included as part of the contract rather than given to the client in advance. Despite the changes in the laws, the CSLB still refers to "Notice to Owner" in several current publications as well as on their website. Without any evidence to the contrary, we must assume that the question may still be an active question in the database. If this question still appears as written here, then the correct answer is "Notice to Owner." A three-day notice of right to cancel is also included as part of the contract, but is not required if the contract is negotiated at the contractor's place of business. A 20-day Preliminary Notice is typically delivered by the subcontractor when he or she starts work, but can be delivered later. Ms. Gomez applies for a job. Of the following, the only reason an employer may lawfully deny her employment is:
he is canceling the contract. Is Mr. Jones' cancellation effective? - Yes. Mr. Jones' letter does cancel the contract because it indicates his intention not to be bound by the contract. As part of the safety training process, contractors's supervisors are required to conduct "toolbox" or "tailgate" safety meetings. How often must these meetings be held. - At least once every ten working days. 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. - The homeowner may give the sales person a bonus. As required by the Immigration Reform and Control Act, all employees hired on or after November 7, 1986 must complete what form to verify their employment eligibility status?
- I- 9 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? - The down payment is limited to $1,000 or 10% of the total price, which ever is less. 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. - You must pay the additional tax in the county where the materials were purchased. A notice of completion must be recorded within: - A notice of completion must be recorded within 10 days after work is completed.
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 - Any work related illness or injury must be reported to the workers compensation insurance company within 5 days. 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 - Workers compensation insurance premiums Who pays FICA? - For FICA, it is 50% the employer and 50% the employee. If, during excavation, you unearth human remains or burial artifacts at a construction site, what should you do? - Stop work immediately at that site and any there nearby area that may have remains. Who would be held responsible if a contractor completes a project according to plans and later discovers that there is a building code violation? - Both the contractor and the architect would be liable. 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 - Income Statement If required safety devices are missing from tools, what should an employee do? - Notify the contractor, who is responsible for safety. AB 2040 requires that before work begins on a project, the contractor must inquire of the owner whether asbestos is present in any building constructed prior to: - A contractor must inquire on any building built before 1978 about asbestos.
A RME may act as the qualifier for no more than ________ firms in any one-year period. A. One B. Two C. Three D. Four - A RME may only act as the qualifier for one firm in any one year period. Which of the following is not covered by standard contractor's insurance policies? A. Employees' tools B. Contractor's tools C. Damage from fire, storm, theft, and vandalism D. Job materials - If a contractor had a builders risk policy, a general liability policy, and a inland marine policy as a standard guideline, employees tools would not be covered by any of the standard policies. Unsafe or faulty equipment is found on a job site. What should be done?. - It is the contractor's responsibility to correct the problem. Who furnishes MSDS sheets? - The supplier is who should furnish MSDS sheets. At the end of each month, data is posted from the bookkeeping journals to the: - At the end of each month data should be posted from the bookkeeping journal to the general ledger. Except in an emergency, you must notify the regional Underground Service Alert Notification Center no less than _____ nor more than _____ starting excavation work. A. 1 day before ... 14 days before B. 2 days before ... 14 days after C. 2 days before ... 14 days before D. 3 days before ... 28 days after - You must notify the regional UAS alert notification center at least 2 days before and no more than 14 days before starting excavation work. If you are a subcontractor, there are three general steps in the mechanics' lien procedure to make sure you are paid for works of improvement upon property. Step 1: Determine the exact legal description of the property (map book, page, etc.). Step 2: Step 3: Complete the work and record a Claim of Lien if you are not paid on time. What is Step 2? A. Request prepayment for your work. B. Serve a preliminary 20-day notice.
C. Run credit checks on the owner and prime contractor. D. List the attorney representing the subcontractor. - If you are a subcontractor the three steps of the mechanics' lien procedure to make sure you are paid for your work are Step 1: Determine the exact legal description of the property (map book, page, etc.) Step 2: Serve preliminary 20-day notice. Step: 3 Complete the work and record a Claim of Lien if you are not paid on time. Before you build on a landfill you must notify: - The government and the engineers. If a building permit is required, when does the law permit a building inspector to enter and inspect a residence? - The law permits an inspector to enter and inspect a residence between 8 am and 6 pm unless the owner has given permission to inspect at some other time. When a joint control addendum is used, which of the following does not have to be included in a home improvement contract? A. Owner's signature B. Schedule of payments C. Notice to Owner D. License number of the contractor - A schedule of payments does not need to be included in a home improvement contract if a joint control addendum is used. A contractor is bidding on a project for a homeowner. The homeowner has included several "extra" items to be bid upon. After receiving the bid, the homeowner said it was too high and asked the contractor to lower the price. What should the contractor do? - Negotiate with the homeowner to reduce the scope of the work by eliminating some of the extra items. A balance sheet shows: - A balance sheet shows assets and liabilities at a certain point in time. Which of the following are employees NOT required to learn? A. CPR B. How to conduct tailgate safety meetings C. Safety features of tools D. First-aid procedures - Employees are required to learn safety features of tools, firstaid procedures and how to conduct tailgate safety meetings. They are not required to learn CPR.
What federal forms are given to a newly hired employee? - A W-4 and I-9 must be given to all newly hired employees. An income statement shows: - An income statement shows revenues and expenses over an extended period of time. When calculating unemployment and disability insurance taxes, an employer would not include: A. Bonuses B. Severance Pay C. Wages D. Overtime - Severance pay would not be included in calculating unemployment and disability insurance. Which of the following is a correct statement about budgets? A. Budgets do not require accurate books. B. Budgets do not require detailed cost information. C. The goal of a budget is to forecast expenses as accurately as possible. D. A budget should allow leeway for month-to-month variations. - A budget should allow leeway for month-to-month variations. How often should the safety supervisor be at the job site? - It depends on the work being done. There is a near-miss safety situation on a job. What steps should the employer take? - The unsafe situation must be investigated, and the investigation must include a written report. How should the prime contractor determine whether a subcontractor has workers' compensation insurance? - The prime contractor should ask to see the expiration date on the sub's certificate of insurance. In most construction contracts, the retention may be held for up to _____ days as a guarantee that the prime pays the subcontractors and suppliers. - Retention may be held for up to 60 days. A contractor bids on a home improvement project and earns the bid. Later, he decides not to take the job. Which bond would protect the home owner? - A bid bond would protect the client from a contractor who declines to take a job that has already bid.
Of the following, which is the best description of "accounts receivable"? A. Money due from customers who have purchased goods or services on credit. B. Business costs and expenses due and payable within the current accounting period. C Accounts listed on the liability side of the balance sheet. D. Money owed to material suppliers for credit purchases. - Money due from customers who have purchased goods or services on credit. What is used to analyze the income and outflow of cash during a period of time? - A cash flow statement is used to analyze the income and outflow of cash. A consumer may cancel a home solicitation contract at any time prior to midnight of the _____ after the date of the transaction. A. 2nd business day B. 3rd business day C. 5th business day D. 7th calendar day - A consumer may cancel a home solicitation contract at anytime prior to midnight of the 3rd business day after the date of the transaction. When preparing a bid you should: A. Evaluate the effect of unexpected delays on costs B. Put as little in writing as possible C. Schedule the job to slightly overload your capacity D. None of the above - Evaluate the effect of unexpected delays on costs. Where must a contractor include the "Notice to Owner"? - In all home improvement contracts over $ A contractor's license has expired. How long after the date of expiration does the contractor have to renew the license before it becomes void? - A contractor has five years after the date of expiration to renew the license before it becomes void. To whom does an employer pay FUTA tax? - FUTA tax is paid to the Internal Revenue Service An owner is having a difficult time making progress payments on time. What should a contractor do to protect himself? - The contractor should ask the owner to open an escrow account. A construction company was hiring a new crew and asked each prospective employee for their name, address, and Social Security number. Several prospective employees
