AFSB 152: Simulated Exam Questions &
Complete Solutions
Which one of the following is an advantage of the takeover option? - Correct Answer
The obligee may forgive a delay or liquidated damages.
The quality of the plans and specifications can greatly influence three tasks that can
determine whether the contractor can successfully perform the work. The three tasks
are... - Correct Answer Estimating, planning, and managing the work to be performed.
Eastown Contracting's balance sheet shows $100,000 in cash, $300,000 in accounts
receivable, $50,000 in equipment, and $150,000 in accounts payable amounts; the
contractor's working capital is - Correct Answer $250,000.
Unlike performance and payment bonds, bid bonds - Correct Answer May not contain
specific penal sums or bond penalties.
Underwriter Albert of Smithson Insurance and Surety would be most interested in which
one of the following groups of financial statements? - Correct Answer Balance sheets,
income statements, cash flow statements, and supporting notes and schedules for the
past three to five years, including interim statements for the current fiscal year and
concurrent statements for all indemnitors.
Genkins Construction is a general contractor. Because of the highly competitive market
in the area surrounding its office, where it typically bids jobs, Genkins began bidding
jobs outside its usual territory. Genkins won bids on five projects that are 400 miles west
of its normal operating territory in a nearby state. Genkins expects those jobs to
continue over the next two years, but development in the area appears promising, so
Genkins might bid additional jobs in this new location. Aside from project-specific risk,
what other possibility might Genkins consider? - Correct Answer Genkins might
consider opening a regional office in the new region with the expectation of competing
for work there on an ongoing basis.
Major Office Complex Financial Data 25% Complete Total Contract:
Contract price $1,100,000
Estimated price 1,000,000
Estimated gross profit $100,000
Cumulative From Inception:
Billings to date $300,000
Costs incurred to date 250,000
Billings in excess of cost $50,000
Collections to date $200,000
Costs paid to date 125,000
Collections in excess of payments $75,000
, Financial Data is shown above for Construction Company's $1,100,000 contract for its
Major Office Complex project. Based on 25 percent completion, what is the
recognized/earned gross profit using the cash accounting method? - Correct Answer
Cash method gross profit = collections − payments;
$200,000 − $125,000 = $75,000.
The recognized/earned gross profit using the cash accounting method is $75,000.
Johann is a new claims representative with Raymond Surety who is learning how to
handle payment bonds proficiently. As he is studying the Miller Act, he continues to see
"labor and materials" and could not find these terms defined in the Act itself. Where will
Johann find clarity as to what these terms mean? - Correct Answer Johann can consult
the applicable and relatively stable case law that does define the terms.
So that the underwriter can evaluate the contractor's completed jobs, work programs,
and experience, the principal should provide - Correct Answer The type, size, and
location of work for the past three to five years; the largest previous backlog; and the
gross profit or loss on all major jobs completed.
Farrell Lighting is involved in the construction of a new government building in
Washington D.C. Farrell Lighting is supplying all of the indoor lighting fixtures to Reid
Electrical. Reid Electrical is the electrical subcontractor on the job. Under the Miller Act,
Farrell Lighting could file a payment bond claim as a - Correct Answer Second-tier
claimant
A contract status report provides costs incurred to date of $40,000, gross profit
recognized to date of $10,000, and billings to date of $80,000. This reflects an - Correct
Answer Overbilling of $30,000.
The payment of retainage held by the contractor is of particular interest in underwriting a
subcontractor whose - Correct Answer Work on the project is completed early in the
contract term, and the contract spans multiple years.
Which one of the following guarantees completion of a project if the principal fails to
perform, in accordance with the plans and specifications, in the given time limit and free
of liens? - Correct Answer Lenders bond
The Forest Lane project will ultimately involve project owner Forest Lane Development
Company, architect Raymond Haskins, and contractor Winsell Builders, although
several other contractors were bidding on the project. Three different subcontractors will
be contributing to the construction effort. For this project, the tender preparation stage of
estimating most specifically began - Correct Answer After the architect and owner
solicit bids, when the contractors begin their estimating processes.
