Florida General Contractor Exam — All Questions
62 questions
A contractor's balance sheet lists total assets of $750,000 and total liabilities of $290,000. Under the accounting equation, what is the owner's equity?
- a.$460,000✓
- b.$290,000
- c.$1,040,000
- d.$750,000
The accounting equation is Assets = Liabilities + Owner's Equity, so Owner's Equity = Assets - Liabilities = $750,000 - $290,000 = $460,000. This identity must always balance and is the foundation of the balance sheet.Florida Contractors Manual, Accounting (accounting equation: Assets = Liabilities + Owner's Equity)
A contractor completes $80,000 of work in December but has not yet been paid or invoiced the customer. On the company's books this $80,000 is recorded as revenue in December. Which accounting method is being used?
- a.Completed-contract method
- b.Percentage-of-completion by billings
- c.Accrual basis✓
- d.Cash basis
Accrual basis records income when it is earned (the work is performed and billable) and expenses when incurred, regardless of when cash changes hands. Cash basis would record nothing until payment is actually received.IRS Pub. 538, Accounting Periods and Methods (cash vs. accrual)
A contractor signs a $600,000 contract with total estimated costs of $450,000. At year-end $180,000 of costs have been incurred. Using the cost-to-cost percentage-of-completion method, how much revenue is recognized to date?
- a.$240,000✓
- b.$180,000
- c.$270,000
- d.$450,000
Percent complete = costs incurred / total estimated costs = $180,000 / $450,000 = 40%. Revenue recognized to date = 40% x $600,000 contract price = $240,000. The completed-contract method would recognize $0 until the job is finished.IRC Sec. 460; IRS Pub. 538 (percentage-of-completion, cost-to-cost)
On a job that is 50% complete with $250,000 of revenue earned to date, the contractor has billed the owner $300,000. How is the $50,000 difference classified on the balance sheet?
- a.A current liability (billings in excess of costs and estimated earnings)✓
- b.A current asset (costs and estimated earnings in excess of billings to date)
- c.Recognized revenue on the income statement for the period just completed
- d.A long-term liability, because the contract will not be completed within twelve months
Billed ($300,000) exceeds earned ($250,000) by $50,000, so the contractor is over-billed. Over-billing is a current liability ('billings in excess of costs and estimated earnings') because the contractor holds the owner's money for work not yet performed.Florida Contractors Manual, construction work-in-process accounts (over-/under-billing)
Which statement about debits and credits in double-entry bookkeeping is correct?
- a.A revenue account increases with a debit and decreases with a credit
- b.An asset account increases with a debit and decreases with a credit✓
- c.A debit always decreases an account balance, whatever the account type
- d.A liability account increases with a debit, not with a credit entry
Direction depends on account type: assets and expenses increase with a debit; liabilities, owner's equity, and revenue increase with a credit. 'Debit' does not universally mean decrease, nor 'credit' increase.Florida Contractors Manual, double-entry bookkeeping (debit/credit rules)
Which of the three core financial statements reports a company's position as a snapshot at a single point in time rather than over a span of time?
- a.The income (profit-and-loss) statement
- b.The trial balance
- c.The balance sheet✓
- d.The cash-flow statement
The balance sheet is a snapshot as of a single date (e.g., 'as of December 31'). The income statement and cash-flow statement both cover a period of time (month, quarter, or year).Florida Contractors Manual, financial statements (balance sheet vs. income and cash-flow statements)
A contractor has current assets of $400,000, which include $100,000 of inventory, and current liabilities of $200,000. What is the quick (acid-test) ratio?
- a.0.5
- b.1.33
- c.2.0
- d.1.5✓
Quick ratio = (current assets - inventory) / current liabilities = ($400,000 - $100,000) / $200,000 = $300,000 / $200,000 = 1.5. The quick ratio excludes inventory, making it a stricter test than the current ratio (which here would be 2.0).Florida Contractors Manual, liquidity ratios (quick/acid-test ratio)
A contractor has fixed costs of $90,000 per year. Each job sells for $3,000 and carries $1,800 of variable cost. How many jobs must the contractor complete per year to break even?
- a.30 jobs
- b.60 jobs
- c.75 jobs✓
- d.50 jobs
Contribution margin per job = price - variable cost = $3,000 - $1,800 = $1,200. Break-even units = fixed costs / contribution margin = $90,000 / $1,200 = 75 jobs. Dividing by the full price or by variable cost alone is the classic trap.Florida Contractors Manual, break-even analysis (units = fixed costs / contribution margin)
A contractor buys equipment for $60,000, expects a $10,000 salvage value, and a 5-year useful life. What is the annual straight-line depreciation?
- a.$14,000
- b.$8,000
- c.$12,000
- d.$10,000✓
Straight-line annual depreciation = (Cost - Salvage) / Useful life = ($60,000 - $10,000) / 5 = $50,000 / 5 = $10,000 per year. Forgetting to subtract salvage value ($60,000 / 5 = $12,000) is the common error.IRS Pub. 946, How to Depreciate Property (straight-line method)
A contractor buys a truck for $30,000 with a 5-year useful life and a $3,000 salvage value, using the double-declining-balance (DDB) method. What is the first-year depreciation?
- a.$6,000
- b.$12,000✓
- c.$10,800
- d.$5,400
The DDB rate = 2 x (1/useful life) = 2 x (1/5) = 40%. It is applied to the beginning book value and ignores salvage in early years: 40% x $30,000 = $12,000. Straight-line ($30,000-$3,000)/5 = $5,400 would be wrong for DDB.IRS Pub. 946 (double-declining-balance method)
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A Florida laborer earns $2,000 gross for a pay period, below the Social Security wage base. Separate from what is withheld from the worker, how much FICA (Social Security + Medicare) must the EMPLOYER pay as its own matching share?
- a.$153.00✓
- b.$124.00
- c.$29.00
- d.$306.00
The employer matches the employee's FICA dollar for dollar: 6.2% Social Security + 1.45% Medicare = 7.65%. 7.65% x $2,000 = $153.00. The employee pays another $153.00, for 15.3% combined.IRS Circular E, Pub. 15 (FICA: 6.2% Social Security + 1.45% Medicare, employer match)
The gross FUTA (federal unemployment) rate is 6.0% on the first $7,000 of each employee's annual wages. For an employer that pays its state unemployment tax on time and receives the full credit, what is the effective FUTA rate?
- a.5.4%
- b.1.45%
- c.6.0%
- d.0.6%✓
The full 5.4% state credit reduces the 6.0% gross rate to an effective 0.6% (a maximum of about $42 per employee per year). FUTA is paid entirely by the employer and is never withheld from the employee.IRS Circular E, Pub. 15; Form 940 (FUTA rate and state credit)