FLORIDA CONSTRUCTION INDUSTRY
LICENSING BOARD RESIDENTIAL
CONTRACTOR BUSINESS AND FINANCE
EXAM WITH QUESTIONS AND VERIFIED
ANSWERS, PLUS DETAILED
RATIONALES/EXPERT VERIFIED FOR
GUARANTEED PASS 2026/LATEST
UPDATE/INSTANT DOWNLOAD PDF
1. Which financial statement is primarily designed to show a
contractor’s financial position at a specific point in time?
A. Income statement
B. Balance sheet
C. Cash-flow statement
D. Job-cost report
Answer: B. Balance sheet
Rationale: A balance sheet reports assets, liabilities, and owner's
equity at a particular date. For a contractor, it provides a snapshot of
financial strength and helps evaluate whether the business has
sufficient resources to meet its obligations. An income statement
measures operating performance over a period, while a cash-flow
statement tracks cash movement.
2. A residential contractor has $275,000 in current assets and
$125,000 in current liabilities. What is the contractor's working
capital?
,A. $150,000
B. $400,000
C. $125,000
D. $220,000
Answer: A. $150,000
Rationale: Working capital is calculated as current assets minus
current liabilities. Therefore, $275,000 − $125,000 = $150,000.
Positive working capital generally indicates that the contractor has a
financial cushion for short-term obligations such as payroll, supplier
invoices, insurance, and operating expenses.
3. A contractor has current assets of $360,000 and current liabilities
of $180,000. What is the current ratio?
A. 0.50:1
B. 1.00:1
C. 2.00:1
D. 3.00:1
Answer: C. 2.00:1
Rationale: The current ratio is current assets divided by current
liabilities. $360,000 ÷ $180,000 = 2.00. A 2:1 current ratio means the
contractor has approximately $2 of current assets for every $1 of
current liabilities.
4. Which accounting method recognizes revenue and expenses when
they are earned or incurred rather than when cash changes hands?
A. Cash-basis accounting
B. Accrual-basis accounting
,C. Modified cash accounting
D. Single-entry accounting
Answer: B. Accrual-basis accounting
Rationale: Accrual accounting records transactions when the
economic event occurs. Revenue may therefore be recognized when
earned even if the customer has not yet paid, and expenses may be
recorded when incurred even if the contractor has not yet paid the
supplier. This provides a more complete picture of business
performance.
5. A contractor completes $80,000 of work during a month but
receives only $50,000 from customers during that month. Under
accrual accounting, assuming the revenue has been earned, how
much revenue is generally recognized?
A. $30,000
B. $50,000
C. $80,000
D. $130,000
Answer: C. $80,000
Rationale: Accrual accounting recognizes earned revenue rather than
merely cash collected. The remaining $30,000 would generally be
recorded as an account receivable until collected, assuming the
applicable accounting requirements are satisfied.
6. Which of the following is normally classified as a current liability?
A. Land owned by the contractor
B. Equipment
, C. Accounts payable due to suppliers
D. Long-term building loan due in ten years
Answer: C. Accounts payable due to suppliers
Rationale: Accounts payable represent amounts owed to suppliers or
other creditors that are generally expected to be paid within the normal
operating cycle or within one year. Land and equipment are assets,
while a long-term loan is generally classified as a long-term liability
except for its current portion.
7. A contractor purchases a truck for $90,000 and expects to use it for
several years. How should the purchase generally be treated for
accounting purposes?
A. Entirely as an immediate operating expense in every case
B. As an asset subject to depreciation, subject to applicable accounting
rules
C. As a liability only
D. As revenue
Answer: B. As an asset subject to depreciation, subject to applicable
accounting rules
Rationale: A truck used in the business generally provides benefits
over multiple accounting periods and is therefore normally recorded as
a fixed asset. Its depreciable cost is allocated over its estimated useful
life according to the applicable depreciation method and tax rules.
8. What is depreciation primarily intended to accomplish in financial
accounting?
A. Increase the market value of equipment
B. Allocate the cost of a depreciable asset over its useful life
LICENSING BOARD RESIDENTIAL
CONTRACTOR BUSINESS AND FINANCE
EXAM WITH QUESTIONS AND VERIFIED
ANSWERS, PLUS DETAILED
RATIONALES/EXPERT VERIFIED FOR
GUARANTEED PASS 2026/LATEST
UPDATE/INSTANT DOWNLOAD PDF
1. Which financial statement is primarily designed to show a
contractor’s financial position at a specific point in time?
A. Income statement
B. Balance sheet
C. Cash-flow statement
D. Job-cost report
Answer: B. Balance sheet
Rationale: A balance sheet reports assets, liabilities, and owner's
equity at a particular date. For a contractor, it provides a snapshot of
financial strength and helps evaluate whether the business has
sufficient resources to meet its obligations. An income statement
measures operating performance over a period, while a cash-flow
statement tracks cash movement.
2. A residential contractor has $275,000 in current assets and
$125,000 in current liabilities. What is the contractor's working
capital?
,A. $150,000
B. $400,000
C. $125,000
D. $220,000
Answer: A. $150,000
Rationale: Working capital is calculated as current assets minus
current liabilities. Therefore, $275,000 − $125,000 = $150,000.
Positive working capital generally indicates that the contractor has a
financial cushion for short-term obligations such as payroll, supplier
invoices, insurance, and operating expenses.
3. A contractor has current assets of $360,000 and current liabilities
of $180,000. What is the current ratio?
A. 0.50:1
B. 1.00:1
C. 2.00:1
D. 3.00:1
Answer: C. 2.00:1
Rationale: The current ratio is current assets divided by current
liabilities. $360,000 ÷ $180,000 = 2.00. A 2:1 current ratio means the
contractor has approximately $2 of current assets for every $1 of
current liabilities.
4. Which accounting method recognizes revenue and expenses when
they are earned or incurred rather than when cash changes hands?
A. Cash-basis accounting
B. Accrual-basis accounting
,C. Modified cash accounting
D. Single-entry accounting
Answer: B. Accrual-basis accounting
Rationale: Accrual accounting records transactions when the
economic event occurs. Revenue may therefore be recognized when
earned even if the customer has not yet paid, and expenses may be
recorded when incurred even if the contractor has not yet paid the
supplier. This provides a more complete picture of business
performance.
5. A contractor completes $80,000 of work during a month but
receives only $50,000 from customers during that month. Under
accrual accounting, assuming the revenue has been earned, how
much revenue is generally recognized?
A. $30,000
B. $50,000
C. $80,000
D. $130,000
Answer: C. $80,000
Rationale: Accrual accounting recognizes earned revenue rather than
merely cash collected. The remaining $30,000 would generally be
recorded as an account receivable until collected, assuming the
applicable accounting requirements are satisfied.
6. Which of the following is normally classified as a current liability?
A. Land owned by the contractor
B. Equipment
, C. Accounts payable due to suppliers
D. Long-term building loan due in ten years
Answer: C. Accounts payable due to suppliers
Rationale: Accounts payable represent amounts owed to suppliers or
other creditors that are generally expected to be paid within the normal
operating cycle or within one year. Land and equipment are assets,
while a long-term loan is generally classified as a long-term liability
except for its current portion.
7. A contractor purchases a truck for $90,000 and expects to use it for
several years. How should the purchase generally be treated for
accounting purposes?
A. Entirely as an immediate operating expense in every case
B. As an asset subject to depreciation, subject to applicable accounting
rules
C. As a liability only
D. As revenue
Answer: B. As an asset subject to depreciation, subject to applicable
accounting rules
Rationale: A truck used in the business generally provides benefits
over multiple accounting periods and is therefore normally recorded as
a fixed asset. Its depreciable cost is allocated over its estimated useful
life according to the applicable depreciation method and tax rules.
8. What is depreciation primarily intended to accomplish in financial
accounting?
A. Increase the market value of equipment
B. Allocate the cost of a depreciable asset over its useful life
