Nevada (NV) CMS Contractor Management Survey Exam with Questions and Answers

Nevada (NV) CMS Contractor Management Survey Exam with Questions and Answers A contractor uses the accrual method of accounting. Materials worth $40,000 are received and used in December, but payment is not made until January. When should the expense be recognized? a. January, when payment is made b. December, when the materials are used c. When the project is completed d. At the end of the fiscal year only Correct Answer: b. December, when the materials are used Rationale: Under accrual accounting, expenses are recognized when incurred rather than when cash is paid. This matches costs with the period in which they contribute to revenue generation. A construction firm's current assets total $350,000 and its current liabilities total $250,000. What is the company's working capital? a. $600,000 b. $100,000 c. $250,000 d. $350,000 Correct Answer: b. $100,000 Rationale: Working capital equals current assets minus current liabilities. $350,000 − $250,000 = $100,000. Positive working capital indicates the company can better meet short-term obligations.