TIPS FOR FINAL LAW EXAMINATION Q3. The key word is "required", meaning by law. You would be foolish not to include all information, but it is not "required". (advertising includes business cards) Q5. Remember, the company owns the license, the Qualifying Individual (QI) simply takes the test. The QI may wholly own the company, but he does not own the license. The company and the QI are two separate entities. Q6.(c) Since an RME is a full time employee he/she may not qualify for additional licenses. A person cannot be a full time employee for more than one company. Only an RMO may qualify for more than one license. Q7. An RME may be employed by any type of company. Q11. A partnership has the names of the partners listed on the license, therefore, when partners are changed a new license must be obtained with the names of the new partners listed. Q12. A license for a corporation does not have the corporate officers listed on the license. If officers are changed, only a notification to the Registrar is required. NOTE: The above two answers do not apply if the QI has left the company. In this case, the QI must be replaced within 90 days unless a continuance has been obtained. (see question 13.) Q14.(c) The continuance is not based upon a passing grade on the examination since the continuance is issued before the examination is taken. Q15. Remember, the QI and the company are two separate entities. The company is always required to post a bond. If the QI owns less than 10% of the company he/she must also post a bond. Q16. Example:: License period Nov 30, 1995 to Nov 30, 1997 1 yr Bond Nov 30, 1995 to Nov 30, 1996 You do a job Dec 01, 1995 You win Lotto Dec 10, 1995 and quit the business Claim filed Nov 29, 1999 (two years after the license period) You may have been out of business for almost 4 years and still have to answer a claim against your bond. If the claim is valid the bonding company can back-charge you for the amount of the claim. Q17.(a) You have 3 years to obtain your license after you pass the exam. (b) If you want your own license in the same classification you do not have to take the exam again. (d) If you have been a member (officer or partner) of a licensed company for 6 years the exam may be waived for your license. Q23. It is always good practice to have all contracts in writing. Q25. NEVER begin work before 3 days have elapsed from the signing of the contract unless customer provides you with a waiver of his rights to cancel the contract. Q27. The exception is a Swimming Pool Contractor who cannot receive more than $200 or 2% whichever is greater. Q29. You should treat a "change order" as a separate contract and collect for it as soon as you have completed the change. Do not lump it in with progress or other payments of the original contract. Q33.(d) Only the prime contractor is required to place this statement on his/her contract. Q34. Although not required, you should always file the preliminary notice with the county recorder in order to be placed on his/her mailing list. If you are not on the mailing list you will not receive notice if a completion notice or notice of cessation is filed on that property. This could be disastrous as it could lower the time limit you have to file a mechanics lien notice. Q35.(a) You may not file a mechanic's lien on a public project. NOTES: Serving a notice means giving it to all interested parties (owner, prime contractor lending institution, etc.) and receiving a receipt for it or having witnesses that it was served. Filing a notice means to record it with the County Recorder. Q39. Public works projects do not involve "construction lenders". Q40. If you have negotiated a contract with a resident and the resident is not the owner, the owner has no responsibility to pay you if he/she has proceeded correctly with the notice of non-responsibility. Always deal directly with the owner or his/her authorized agent, such as a prime contractor. Q41. If a subcontractor's contract price is less than $400 he/she is not required to serve a preliminary notice. Q47.(a) Since the law says that anyone under the age of 16 cannot work in heavy construction, you are not violating discrimination laws by stating so in your ad. Q50. Don't forget overtime for the second week. Q52. A successor clause states that a new owner of a union company must abide by the union agreement after the sale. Q56. The 30 day time period is given because some injuries may not be considered serious at first examination. What seems to be a pulled muscle in your back may turn out to be a ruptured disc. Q59. As the prime contractor, you are responsible for anyone who works for you or with you on your job. Always make sure that your subs have workers comp. if required. Q64. The key word again is "required". When used by the CSLB the word "required" means to be compelled by law. The law does not require that you see a picture identification or that the prospective employee fill out an application, although it is good practice. Q66. through 69. If a tax is for medical insurance, the employee pays. If a tax is for unemployment or retirement insurance, the employer pays. The employer is always responsible for employing. The individual is responsible for staying health. FICA (social security) is for both medical insurance and retirement pay, therefore both the employee and the employer contribute. Q70. When an employee has earned a preset limit (say $72,000) you are no longer required to deduct SS or SDI from his/her wages. Q71. through 73. All taxes are filed on a quarterly basis except FUTA Q73. through 74. Federal taxes are filed with the IRS. State taxes are filed with the EDD except for Sales & Use taxes that are filed with the Board of Equalization. Q79. The state test may use the terms "two weeks", "14 days", or "10 working days". They are all the same. Q81. In 1978 California banned the use of asbestos in all building materials. Q87. These permits must also be obtained when demolishing any building over three stories in height. They are in addition to the ordinary building permits. Q93. The time period for notifying Dig-Alert is between two days and seven days prior to digging. The state has 14 days to issue the permit. You can see the problem this could create. Q94. It should be a manslaughter charge! Unfortunately it's not. Q96. The bar chart method tells you the approximate start and end dates of each phase of the construction. The critical path method also tells you how each phase ties into the other phases. Q97. A direct cost is any cost that can be attributed directly to a particular job. Q98. An overhead cost is any cost that you would have to pay even if you had no jobs. Q99. In real life, `a.' would be the correct answer. In bureaucratic life, the correct answer is `c.' Q100. (a) If after signing a contract with a sub and sending in his name on the required list, you find for some reason that his work is unsatisfactory, you may inform the awarding authority and they can remove him/her from the list. (c.) A clerical error is defined as: You have signed a contract with Jones Plumbing; your secretary, in typing the list for the awarding authority, inadvertently typed James Plumbing. This, of course, would be an acceptable reason for the substitution of Jones Plumbing for James Plumbing. Q101. The Subletting and Subcontracting Fair Practices Act applies only to public projects. Q104. You may not cancel a contract after it is signed unless one of the parties to the contract has breached the agreement. Q105. A profit of 10% is ridiculous in real life, but the test reflects bureaucratic life. Anything the government has ever run, it has run into the ground. Perhaps a 10% profit way of thinking is the reason. Q106. In real life you often must sharpen your pencil in any competitive venture. Q107. And 108. The state uses a formula to figure bids that is seldom used in real life, but you must learn it to pass the test: The state exam will give you three figures to use in answering their question. Learn the formula below: The state will give you a dollar figure for your Direct Costs, a percentage figure for your Profit and a percentage figure for your Overhead. Example: Direct Costs are $2,250.00 Overhead is 17%. Profit is 8%. Add the two percentages together and deduct the total from 100%. 17% 100% plus 8% minus 25% ------- -------- 25% 75% or .75 To find the Bid Price, divide the Direct Costs by the reciprocal found above. 3,000 Bid Price .75 |2,250 To find the amount of Overhead, multiply the Bid Price by the Overhead percentage. 3000 times .17 -------- $510 Overhead To find the amount of Profit, multiply the Bid Price by the Profit percentage. 3000 times .08 -------- $240 Profit Q109. Material prices and insurance premiums can be obtained before you make the bid. Therefore, profit depends entirely on the labor costs. Labor is difficult to determine because of the possibility of injuries, illness and other unknown factors. Q112. And 113. There are three major types of bonds: A Performance Bond guarantees that you will complete the job to specifications and that it will be accepted. A Payment Bond guarantees that you will pay your suppliers and laborers. A Contract Bond guarantees the entire job including payments and performance. Q114. An Asset is something you own or have control over. Fixed means you have no immediate intention of changing the status of your asset. Q115. Accounts are items on your books. Payable means that you have not yet paid a debt that you have incurred. Q116. Current means to convert to cash within one year. Liabilities are money owed. Q117. Since you have no intention of selling these items, they are fixed. Since you own or have control over them, they are assets. Q118. Receivables are money that you will receive. Q120. Accrued refers to money that is building up, whether payable or receivable. Q121. If you have a vehicle that cost you $15,000 one year ago and it is now worth only $12,000 on the open market, you have a $3,000 depreciation. This can be used as a deduction from gross income when figuring income taxes. Q123. In real life almost all beginning contractors do their own books. As soon as you can afford to, hire an accountant. Q124. The Cash basis of accounting means that you do not mark it down in your account books until money actually changes hands. Q125. And 126. The Accrual basis of accounting means that you mark items in your books as they occur. This makes the Accrual the most desired method of accounting. You can tell at a glance where you are financially at any given time. Your books may say that by the end of the month you will have to pay $3,000 in payables, but you will receive $7,000 in receivables by the end of the month. You know by these figures that as of the present date you have a profit of $4,000 for the current month. With the Cash basis, the only way to find out where you are financially is to look in your wallet. Q127. And 128. If a house cost you $100,000 and you put down $20,000, you have a balance of $80,000. $100,000 Assets Minus 80,000 Liabilities -------------- $ 20,000 Net Worth, Equity, Investment Q130. And 131. What is found on a balance sheet: Only Assets, Liabilities and Net Worth are found on the Balance Sheet. All else is found on the Income statement, also known as the Profit and Loss statement or the P&L statement. Q138. Another bureaucratic answer. If you do not notify the owners, they may get a little upset when the inspector comes in, unannounced, to inspect the job. Also, if you do not clean up the jobsite, the inspector may turn around and leave without inspecting. Q139. The strangest question ever included on a state exam! The only way one can obtain two social security numbers is if they have two legal names. This is possible as in the following example: Marion Morrison was a man who went through college using a single SS#. When he went into the motion picture business he changed his name to John Wayne. He then acquired a second SS# for his stage name. Many people, for one reason or another have two legal names and two legal SS#s. But, if they go to work for you, chances are they are only going to give you one of the names and the SS# that goes with it. There will be no need for two W4 forms.