CSLB CONTRACTOR'S LAW &
BUSINESS EXAM PRACTICE
QUESTIONS AND ANSWERS
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-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?
- Answer-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? -
Answer-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. -
Answer-You must pay the additional tax in the county where the materials were
purchased.
A notice of completion must be recorded within: - Answer-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 - Answer-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 - Answer-Workers compensation
insurance premiums
Who pays FICA? - Answer-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? - Answer-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? - Answer-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 - Answer-Income Statement
If required safety devices are missing from tools, what should an employee do? -
Answer-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: - Answer-A
contractor must inquire on any building built before 1978 about asbestos.
The required Injury and Illness Prevention Program (IIPP) takes the form of: - Answer-
The IIPP Injury and Illness Prevention Program takes the form of a written plan that
includes procedures and that is put into practice and documented.
Social security tax for a self-employed contractor is: - Answer-Based on the rate set for
the self-employed for the year in which the tax is paid.
, For which of the following injuries does Cal/OSHA require employers to make and keep
records?
A. Worker is knocked unconscious but returns to work after resting for one hour.
B. Worker suffers a burn that requires a one-time visit to the doctor.
C. Worker develops a chronic allergy after repeated exposure to fiberglass insulation.
D. All of the above. - Answer-A worker develops a chronic allergy after repeated
exposure to fiberglass insulation.
All would be kept for contractor records however when employee is exposed to
asbestos that is mandatory report. If an employee misses one day or more of work or is
hospitalized that would also be mandatory.
As part of the safety training process, contractors' supervisors are required to meet with
management how often? - Answer-Contractors supervisors are required to meet with
management monthly in regards to the safety training process.
Using money from a current job to pay for unrelated projects is called: - Answer-
Diversion is when you use money from a current job to pay for unrelated projects.
Direct costs are $7,200, overhead is 12%, and profit is 10%. What is the selling price? -
Answer-$9,230.77
Take 10% plus 10%=22% subtract 22% from 100 %= 78% now divide the total cost of
$7,200 by 78%=$9,230.76 round up to $9,230.77.
Excavators must clearly mark the boundaries of a work area, usually with what color
paint. - Answer-Excavators usually mark boundaries of a work area with white paint.
Suppose you include depreciation on your income statement your first year in business,
but you do not include it in the second year. How will this affect your net income being
reported? - Answer-Your net income will be greater than it should be in the second year.
How many days of inactivity must pass before a notice of cessation may be recorded? -
Answer-30 days of inactivity must pass before a notice of cessation may be recorded.
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 - Answer-A RME may only act as the qualifier for one firm in any one year
period.
BUSINESS EXAM PRACTICE
QUESTIONS AND ANSWERS
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-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?
- Answer-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? -
Answer-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. -
Answer-You must pay the additional tax in the county where the materials were
purchased.
A notice of completion must be recorded within: - Answer-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 - Answer-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 - Answer-Workers compensation
insurance premiums
Who pays FICA? - Answer-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? - Answer-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? - Answer-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 - Answer-Income Statement
If required safety devices are missing from tools, what should an employee do? -
Answer-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: - Answer-A
contractor must inquire on any building built before 1978 about asbestos.
The required Injury and Illness Prevention Program (IIPP) takes the form of: - Answer-
The IIPP Injury and Illness Prevention Program takes the form of a written plan that
includes procedures and that is put into practice and documented.
Social security tax for a self-employed contractor is: - Answer-Based on the rate set for
the self-employed for the year in which the tax is paid.
, For which of the following injuries does Cal/OSHA require employers to make and keep
records?
A. Worker is knocked unconscious but returns to work after resting for one hour.
B. Worker suffers a burn that requires a one-time visit to the doctor.
C. Worker develops a chronic allergy after repeated exposure to fiberglass insulation.
D. All of the above. - Answer-A worker develops a chronic allergy after repeated
exposure to fiberglass insulation.
All would be kept for contractor records however when employee is exposed to
asbestos that is mandatory report. If an employee misses one day or more of work or is
hospitalized that would also be mandatory.
As part of the safety training process, contractors' supervisors are required to meet with
management how often? - Answer-Contractors supervisors are required to meet with
management monthly in regards to the safety training process.
Using money from a current job to pay for unrelated projects is called: - Answer-
Diversion is when you use money from a current job to pay for unrelated projects.
Direct costs are $7,200, overhead is 12%, and profit is 10%. What is the selling price? -
Answer-$9,230.77
Take 10% plus 10%=22% subtract 22% from 100 %= 78% now divide the total cost of
$7,200 by 78%=$9,230.76 round up to $9,230.77.
Excavators must clearly mark the boundaries of a work area, usually with what color
paint. - Answer-Excavators usually mark boundaries of a work area with white paint.
Suppose you include depreciation on your income statement your first year in business,
but you do not include it in the second year. How will this affect your net income being
reported? - Answer-Your net income will be greater than it should be in the second year.
How many days of inactivity must pass before a notice of cessation may be recorded? -
Answer-30 days of inactivity must pass before a notice of cessation may be recorded.
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 - Answer-A RME may only act as the qualifier for one firm in any one year
period.
