AFSB 152 COMPREHENSIVE EXAM 2026 QUESTIONS AND
SOLUTIONS RATED A+
✔✔John Marley, the owner of Marley Contracting, regularly depends on practitioners
outside of his organization to help with financial reports that are eventually presented to
Barnard Surety for analysis. Which one of the following statements is correct regarding
the engagement of a licensed public accountant to prepare contractors' financial
statements?
- The bond underwriter should not accept financial statements prepared by a licensed
public accountant
- The bond underwriter should assess a licensed public accountant based on ability to
prepare financial statements
- Licensed public accountants are not permitted by states to prepare contractors'
financial statements
- Licensed public accountants provide the same level of expertise as bookkeeping
services - ✔✔The bond underwriter should assess a licensed public accountant based
on ability to prepare financial statements
✔✔Which one of the following is an advantage of the simple accrual method of
construction accounting?
- A contractor can influence when revenues are earned and costs are incurred
- It provides an accurate measure of the results achieved on work performed during the
accounting period
- It provides for imbalances in billing-cost-gross profit relationships on uncompleted
contracts
- Cash requirements to fund income tax payments are easy to plan - ✔✔A contractor
can influence when revenues are earned and costs are incurred
✔✔Which one of the following is correct about the use of interim financial statements by
bonding company underwriters?
- The benefit is rarely worth the expense for a contractor to provide interim financial
statements
- Bonding underwriters should rely on the annual statement rather than interim financial
statements
- Interim financial statements are important for an informed underwriting decision
- Interim financial statements that are dated in the middle of a month are the most
accurate - ✔✔Interim financial statements are important for an informed underwriting
decision
✔✔Underwriter Henrietta is studying the financial statements of contractor and client
Warner Enterprises. As she performs her analysis, which one of the following best
describes her process and findings?
- Knowing the bottom line amount on Warner's Income Statement is enough for a full
picture of Warner's results
,- Operating activities, investing activities, and financing activities are terms found on the
income statement
- A complete financial statement must include schedules related to contracts in progress
- Identical bottom line results will indicate commensurate values in the quality and types
of earnings - ✔✔A complete financial statement must include schedules related to
contracts in progress
✔✔Which one of the following statements is true regarding a qualitative analysis of a
contractor's balance sheet?
- A treasury stock transaction, or "held in treasury," is accounted for as an increase in
stockholders' equity
- If stockholders' equity figures for two companies are the same, they will be qualitatively
the same as well
- A retained earnings deficit indicates profitable results have increased the total
stockholders' equity
- A large retained earnings component as compared to the invested capital component
is a sign of profitability - ✔✔A large retained earnings component as compared to the
invested capital component is a sign of profitability
✔✔In measuring a financial position at a point in time and financial performance over a
period of time, a financial statement is largely a
- Business contract
- Narrative disclosure
- Qualitative report
- Quantitative assessment - ✔✔Quantitative assessment
✔✔The key indicator of a contractor's success in generating income from its
construction projects is
- Contract revenues earned
- Gross profits
- Gain on the sale of fixed assets
- Income taxes - ✔✔Gross profits
✔✔Which of the following best describes the standards of quality for a contractor's
financial statements?
- The CPA's level of service and skills in preparing the annual financial statement must
be considered
- The contractor's accounting system's adequacy is not a concern when a certified
public accountant (CPA) is engaged
- A high-quality financial statement can be relied on sufficiently so that minimal financial
analysis is needed
- The annual statement must be prepared using generally accepted accounting
principles' percentage-of-completion method - ✔✔The CPA's level of service and skills
in preparing the annual financial statement must be considered
, ✔✔A contractor's ability to acquire, maintain, and successfully manage backlogs is
reflected in which of these income statement results over several accounting periods?
- Interest income
- Operating profit
- Provision for income taxes
- Gain on the sale of fixed assets - ✔✔Operating profit
✔✔Helena is conducting an analysis of Reynolds Construction Company's annual
financial statement and reports. As she works through the process, all of the statements
below are true, EXCEPT:
- The six basic components available to Helena are the independent auditor's report,
balance sheets, income statements, statements of retained earnings, statement of cash
flows, and notes to the financial statements
- The basic components and the supplementary schedules lack an independent
auditors' report which significantly takes away from the validity and credibility of this
information
- Contract status reports one through four, a financial statement analysis, and the CPA's
report on deferred income tax provisions are documents available to Helena during her
analysis
- The six basic components available to Helena are the independent auditor's report,
balance sheets, income statements, statements of retained earnings, statement o -
✔✔The basic components and the supplementary schedules lack an independent
auditors' report which significantly takes away from the validity and credibility of this
information
✔✔Which one of the following is true regarding components of a contractor's balance
sheet?
- Total liabilities are comprised of current liabilities added to property and equipment
- The two major categories on a contractor's balance sheet are assets and liabilities
- Total liabilities added to stockholders' equity equals the total assets
- Stockholders' equity is comprised of common stock, retained earnings, and long-term
debt - ✔✔Total liabilities added to stockholders' equity equals the total assets
✔✔Which one of the following describes what happens if there are gaps or omissions in
the construction plans and specifications when they are offered in the competitive bid
process, and they are discovered after the construction begins?
- The contractor must make the changes at its own costs because it failed to notice the
gaps or omissions before placing a bid to contract for the project
- The project owner must pay additional money to the contractor in the form of change
orders during the course of construction
- The contractor must complete the project according to the plans and specifications,
and the owner must contract to correct the problems when the construction is
completed
SOLUTIONS RATED A+
✔✔John Marley, the owner of Marley Contracting, regularly depends on practitioners
outside of his organization to help with financial reports that are eventually presented to
Barnard Surety for analysis. Which one of the following statements is correct regarding
the engagement of a licensed public accountant to prepare contractors' financial
statements?
- The bond underwriter should not accept financial statements prepared by a licensed
public accountant
- The bond underwriter should assess a licensed public accountant based on ability to
prepare financial statements
- Licensed public accountants are not permitted by states to prepare contractors'
financial statements
- Licensed public accountants provide the same level of expertise as bookkeeping
services - ✔✔The bond underwriter should assess a licensed public accountant based
on ability to prepare financial statements
✔✔Which one of the following is an advantage of the simple accrual method of
construction accounting?
- A contractor can influence when revenues are earned and costs are incurred
- It provides an accurate measure of the results achieved on work performed during the
accounting period
- It provides for imbalances in billing-cost-gross profit relationships on uncompleted
contracts
- Cash requirements to fund income tax payments are easy to plan - ✔✔A contractor
can influence when revenues are earned and costs are incurred
✔✔Which one of the following is correct about the use of interim financial statements by
bonding company underwriters?
- The benefit is rarely worth the expense for a contractor to provide interim financial
statements
- Bonding underwriters should rely on the annual statement rather than interim financial
statements
- Interim financial statements are important for an informed underwriting decision
- Interim financial statements that are dated in the middle of a month are the most
accurate - ✔✔Interim financial statements are important for an informed underwriting
decision
✔✔Underwriter Henrietta is studying the financial statements of contractor and client
Warner Enterprises. As she performs her analysis, which one of the following best
describes her process and findings?
- Knowing the bottom line amount on Warner's Income Statement is enough for a full
picture of Warner's results
,- Operating activities, investing activities, and financing activities are terms found on the
income statement
- A complete financial statement must include schedules related to contracts in progress
- Identical bottom line results will indicate commensurate values in the quality and types
of earnings - ✔✔A complete financial statement must include schedules related to
contracts in progress
✔✔Which one of the following statements is true regarding a qualitative analysis of a
contractor's balance sheet?
- A treasury stock transaction, or "held in treasury," is accounted for as an increase in
stockholders' equity
- If stockholders' equity figures for two companies are the same, they will be qualitatively
the same as well
- A retained earnings deficit indicates profitable results have increased the total
stockholders' equity
- A large retained earnings component as compared to the invested capital component
is a sign of profitability - ✔✔A large retained earnings component as compared to the
invested capital component is a sign of profitability
✔✔In measuring a financial position at a point in time and financial performance over a
period of time, a financial statement is largely a
- Business contract
- Narrative disclosure
- Qualitative report
- Quantitative assessment - ✔✔Quantitative assessment
✔✔The key indicator of a contractor's success in generating income from its
construction projects is
- Contract revenues earned
- Gross profits
- Gain on the sale of fixed assets
- Income taxes - ✔✔Gross profits
✔✔Which of the following best describes the standards of quality for a contractor's
financial statements?
- The CPA's level of service and skills in preparing the annual financial statement must
be considered
- The contractor's accounting system's adequacy is not a concern when a certified
public accountant (CPA) is engaged
- A high-quality financial statement can be relied on sufficiently so that minimal financial
analysis is needed
- The annual statement must be prepared using generally accepted accounting
principles' percentage-of-completion method - ✔✔The CPA's level of service and skills
in preparing the annual financial statement must be considered
, ✔✔A contractor's ability to acquire, maintain, and successfully manage backlogs is
reflected in which of these income statement results over several accounting periods?
- Interest income
- Operating profit
- Provision for income taxes
- Gain on the sale of fixed assets - ✔✔Operating profit
✔✔Helena is conducting an analysis of Reynolds Construction Company's annual
financial statement and reports. As she works through the process, all of the statements
below are true, EXCEPT:
- The six basic components available to Helena are the independent auditor's report,
balance sheets, income statements, statements of retained earnings, statement of cash
flows, and notes to the financial statements
- The basic components and the supplementary schedules lack an independent
auditors' report which significantly takes away from the validity and credibility of this
information
- Contract status reports one through four, a financial statement analysis, and the CPA's
report on deferred income tax provisions are documents available to Helena during her
analysis
- The six basic components available to Helena are the independent auditor's report,
balance sheets, income statements, statements of retained earnings, statement o -
✔✔The basic components and the supplementary schedules lack an independent
auditors' report which significantly takes away from the validity and credibility of this
information
✔✔Which one of the following is true regarding components of a contractor's balance
sheet?
- Total liabilities are comprised of current liabilities added to property and equipment
- The two major categories on a contractor's balance sheet are assets and liabilities
- Total liabilities added to stockholders' equity equals the total assets
- Stockholders' equity is comprised of common stock, retained earnings, and long-term
debt - ✔✔Total liabilities added to stockholders' equity equals the total assets
✔✔Which one of the following describes what happens if there are gaps or omissions in
the construction plans and specifications when they are offered in the competitive bid
process, and they are discovered after the construction begins?
- The contractor must make the changes at its own costs because it failed to notice the
gaps or omissions before placing a bid to contract for the project
- The project owner must pay additional money to the contractor in the form of change
orders during the course of construction
- The contractor must complete the project according to the plans and specifications,
and the owner must contract to correct the problems when the construction is
completed
