New Mexico Contractors Business & Law Exam |
Questions & Answers | Latest Update 2026 | Exam Prep |
Graded A+
1. What is the time frame for a licensee or qualified beneficiary to reimburse the
residential lien recovery?
Within 30 days
Within 45 days
Within 15 days
Within 60 days
2. How does a worker from one state, who is injured while temporarily working
in another state, get the claim covered under Workers' Compensation?
There is no coverage since the worker is not in the state of residence.
The state where he is working must endorse that state's
Workers'Compensation policy.
The state where he is working must be listed under Other States
coverage.
Coverage is compulsory for either state.
3. The term used to refer to a percentage of progress payments held by the
owner until project is completed is called what?
Alternates
Addenda
Retainage
Flow-Down clause
,4. If a contractor fails to file a preliminary notice within the required time frame,
what potential consequences might they face?
They will receive a warning from the state.
They may lose their right to file a lien or seek payment for work
completed.
They will be required to pay a fine.
They can still file a lien without any issues.
5. Describe how the percentage of completion method impacts financial
reporting for contractors.
It allows contractors to report income and expenses in relation to
the work completed at a given time.
It simplifies accounting by ignoring project progress.
It requires contractors to report all income at project completion.
It mandates that all expenses be recorded upfront.
6. Receipts minus disbursements = the money you take in minus the money that
you spend =____ _.
Revenue
Cash flow
COGS
Profit
Gross profit
7. If a contractor fails to pay Social Security taxes for multiple years, what might
be the cumulative financial impact based on the maximum fine percentage?
, The contractor could incur a fine of 10% for each year.
The contractor would not face any fines if they pay the taxes
eventually.
The contractor would only face a one-time fine of 25%.
The contractor could incur fines totaling up to 25% of the unpaid
taxes for each year.
8. If a Residential/Small Commercial contractor is hired to install a security
system that includes both burglar alarms and electrical components, what
should the contractor do to comply with legal requirements?
Only install the burglar alarm and leave the electrical components
uninstalled.
Hire a licensed electrician for the electrical components.
Consult with the client about the electrical components without taking
action.
Install the entire system themselves without additional help.
9. Describe the purpose of retainage in construction contracts.
Retainage is a fee paid to subcontractors for their services.
Retainage serves to ensure that contractors complete the project
satisfactorily and meet all contractual obligations.
Retainage is a tax imposed on contractors by the government.
Retainage is an advance payment made to contractors before project
completion.
10. Which document is NOT typically classified as a source document in
accounting?
, Tax Returns
Invoices
Bank Statements
Receipts
11. What type of insurance is specifically designed to protect contractors from
losses caused by vandalism?
Vandalism insurance
Professional liability insurance
General liability insurance
Workers' compensation insurance
12. Discuss why a Residential/Small Commercial contractor may be permitted to
install burglar alarms but not perform electrical work.
A Residential/Small Commercial contractor may install burglar
alarms because it typically requires less specialized training than
electrical work, which is regulated more strictly.
Both burglar alarms and electrical work require the same level of
licensing.
Electrical work is less regulated than burglar alarm installation.
Burglar alarm installation is considered a form of electrical work.
13. The theoretical support for using the percentage-of-completion method of
accounting for long-term construction projects is that it
Produces a realistic matching of expenses with revenues.
Reports a lower Net Income figure than the completed-contract
method.
Questions & Answers | Latest Update 2026 | Exam Prep |
Graded A+
1. What is the time frame for a licensee or qualified beneficiary to reimburse the
residential lien recovery?
Within 30 days
Within 45 days
Within 15 days
Within 60 days
2. How does a worker from one state, who is injured while temporarily working
in another state, get the claim covered under Workers' Compensation?
There is no coverage since the worker is not in the state of residence.
The state where he is working must endorse that state's
Workers'Compensation policy.
The state where he is working must be listed under Other States
coverage.
Coverage is compulsory for either state.
3. The term used to refer to a percentage of progress payments held by the
owner until project is completed is called what?
Alternates
Addenda
Retainage
Flow-Down clause
,4. If a contractor fails to file a preliminary notice within the required time frame,
what potential consequences might they face?
They will receive a warning from the state.
They may lose their right to file a lien or seek payment for work
completed.
They will be required to pay a fine.
They can still file a lien without any issues.
5. Describe how the percentage of completion method impacts financial
reporting for contractors.
It allows contractors to report income and expenses in relation to
the work completed at a given time.
It simplifies accounting by ignoring project progress.
It requires contractors to report all income at project completion.
It mandates that all expenses be recorded upfront.
6. Receipts minus disbursements = the money you take in minus the money that
you spend =____ _.
Revenue
Cash flow
COGS
Profit
Gross profit
7. If a contractor fails to pay Social Security taxes for multiple years, what might
be the cumulative financial impact based on the maximum fine percentage?
, The contractor could incur a fine of 10% for each year.
The contractor would not face any fines if they pay the taxes
eventually.
The contractor would only face a one-time fine of 25%.
The contractor could incur fines totaling up to 25% of the unpaid
taxes for each year.
8. If a Residential/Small Commercial contractor is hired to install a security
system that includes both burglar alarms and electrical components, what
should the contractor do to comply with legal requirements?
Only install the burglar alarm and leave the electrical components
uninstalled.
Hire a licensed electrician for the electrical components.
Consult with the client about the electrical components without taking
action.
Install the entire system themselves without additional help.
9. Describe the purpose of retainage in construction contracts.
Retainage is a fee paid to subcontractors for their services.
Retainage serves to ensure that contractors complete the project
satisfactorily and meet all contractual obligations.
Retainage is a tax imposed on contractors by the government.
Retainage is an advance payment made to contractors before project
completion.
10. Which document is NOT typically classified as a source document in
accounting?
, Tax Returns
Invoices
Bank Statements
Receipts
11. What type of insurance is specifically designed to protect contractors from
losses caused by vandalism?
Vandalism insurance
Professional liability insurance
General liability insurance
Workers' compensation insurance
12. Discuss why a Residential/Small Commercial contractor may be permitted to
install burglar alarms but not perform electrical work.
A Residential/Small Commercial contractor may install burglar
alarms because it typically requires less specialized training than
electrical work, which is regulated more strictly.
Both burglar alarms and electrical work require the same level of
licensing.
Electrical work is less regulated than burglar alarm installation.
Burglar alarm installation is considered a form of electrical work.
13. The theoretical support for using the percentage-of-completion method of
accounting for long-term construction projects is that it
Produces a realistic matching of expenses with revenues.
Reports a lower Net Income figure than the completed-contract
method.
