AFSB 152 Sample Exam Part B With
100% Correct Answers 2023
Judith owns Quality Construction. A city invited bids for a public park improvement
contract. Quality stands a fair chance of making a successful bid because of a local -
Correct Answer-Set-aside program
!he City of Lincoln is contracting for a major sewer and water line installation project; It
is impossible to determine in advance. the exact quantity of work that the contract will
require. The appropriate type of contract for this project is a - Correct Answer-
Guaranteed maximum price contract.
Building Buddies, Inc., (BBI) has applied for surety bonding from Surety Company. To
underwrite the d:mtract bond, the underwriter has required BBI to provide the following
financial information to complete the analysis: past and current financial statements,
contract status reports, past and an1:icipat~d changes in financial condition, and -
Correct Answer-Available credit
Using this information, which one of the following represents the backlog on a cost
basis?
Total contract price - $8,100,000
Estimated total cost - $7,570,000
Total amount billed to date - $3,150,000
Costs incurred to date - $2,930,000 - Correct Answer-$4,640,000
John, an analyst, was reviewing financial statements for XYZ
Construction. He noticed that the statement showed accounts
receivable of $700,000. Later John observed that $200,000 of
those receivables was uncollectible, so he disallowed the $200,000 and adjusted the
accounts receivable to $500,000 for underwriting purposes. In this example, the
resulting $500,000 is an - Correct Answer-As-allowed amount
Bondrite Corporation is considering issuing surety bonds for
international construction companies doing business in the United States. This has
provoked much debate among Bondrite's bond underwriters. An underwriting concern
with this reverse flow international bonding is that - Correct Answer-The financial
strength of many of the international companies
resides outside of the U.S.
Contractors, Inc., has defaulted on a contract secured by Jenning Surety. Jenning's
claim representative, Bob, has evaluated its performance bond options and elected to
finance Contractors. Bob estimates that it must pay $300,000 under the performance
, bond and $100,000 under the payment bond. The accounting for Contractors reflects
that the
obligee will pay a $75,000 contract balance for completion of the work. Using these
figures, Bob calculates Jenning's net case loss reserve as - Correct Answer-$325,000
A contract for $1 million contains a provision calling for ninety
percent of monthly progress payments, with ten percent to be held until completion. Fifty
percent of the contract has been physically completed and paid for. How much has the
owner paid to the general contractor? - Correct Answer-$450,000
ABC Construction Case: ABC Construction entered into a silent joint venture with
Stealth Construction. They bid on a $500,000 sewer-line project. ABC was awarded the
contract. The surety secured ABC's and Stealth's signatures on the indemnity
agreement before final bonds were issued. Subsequently, ABC suffers a financial
setback.
Subcontractors and suppliers make claims for $200,000 against the surety. Although
ABC's financial resources are exhausted, the obligee holds $50,000 of retainage on the
job. Which one of the following best represents the surety's right under the indemnity
agreement? - Correct Answer-The surety has the right to pursue both ABC and Stealth,
jointly and severally.
Contractor A bids a job at $8 million. Contractor B, Contractor C, and Contractor D bid
the job at $7.1 million, $7.0 million, and $6.9 respectively. In this case, most sureties
would apply the 10 percent rule to Contractor N.s bid and - Correct Answer-An average
of all of the above bids
Very Heavy Construction (VHC) is negotiating with Harper Realty to construct an office
building. Harper has secured short term construction financing and a long-term
mortgage. Harper has signed leases with ten tenants, each at $3,500 per month, with
occupancy beginning on November 1, 2004. The monthly revenue from the leases will
enable Harper to make its $32,000 monthly mortgage payment.
The construction terms of the contract require the contractor
to complete the building and have it ready for occupancy by October 15, 2004. The
liquidated damage clause states that VHC must pay $1,000 per day in damages for
each day the project goes unfinished beyond the completion date. VHC is thirty days
late. How much would VHC pay in damages to Harper Realty? - Correct Answer-
$30,000
Smith Contractors submits a bid bond request to the surety for a job to construct a
school addition. The Underwriting Memorandum -
includes the following:
Estimated bid for school addition - $1,500,000
Largest similar job completed - $1,100,000
Contract price of backlog - $360,000
Work on hand is 80% complete.
100% Correct Answers 2023
Judith owns Quality Construction. A city invited bids for a public park improvement
contract. Quality stands a fair chance of making a successful bid because of a local -
Correct Answer-Set-aside program
!he City of Lincoln is contracting for a major sewer and water line installation project; It
is impossible to determine in advance. the exact quantity of work that the contract will
require. The appropriate type of contract for this project is a - Correct Answer-
Guaranteed maximum price contract.
Building Buddies, Inc., (BBI) has applied for surety bonding from Surety Company. To
underwrite the d:mtract bond, the underwriter has required BBI to provide the following
financial information to complete the analysis: past and current financial statements,
contract status reports, past and an1:icipat~d changes in financial condition, and -
Correct Answer-Available credit
Using this information, which one of the following represents the backlog on a cost
basis?
Total contract price - $8,100,000
Estimated total cost - $7,570,000
Total amount billed to date - $3,150,000
Costs incurred to date - $2,930,000 - Correct Answer-$4,640,000
John, an analyst, was reviewing financial statements for XYZ
Construction. He noticed that the statement showed accounts
receivable of $700,000. Later John observed that $200,000 of
those receivables was uncollectible, so he disallowed the $200,000 and adjusted the
accounts receivable to $500,000 for underwriting purposes. In this example, the
resulting $500,000 is an - Correct Answer-As-allowed amount
Bondrite Corporation is considering issuing surety bonds for
international construction companies doing business in the United States. This has
provoked much debate among Bondrite's bond underwriters. An underwriting concern
with this reverse flow international bonding is that - Correct Answer-The financial
strength of many of the international companies
resides outside of the U.S.
Contractors, Inc., has defaulted on a contract secured by Jenning Surety. Jenning's
claim representative, Bob, has evaluated its performance bond options and elected to
finance Contractors. Bob estimates that it must pay $300,000 under the performance
, bond and $100,000 under the payment bond. The accounting for Contractors reflects
that the
obligee will pay a $75,000 contract balance for completion of the work. Using these
figures, Bob calculates Jenning's net case loss reserve as - Correct Answer-$325,000
A contract for $1 million contains a provision calling for ninety
percent of monthly progress payments, with ten percent to be held until completion. Fifty
percent of the contract has been physically completed and paid for. How much has the
owner paid to the general contractor? - Correct Answer-$450,000
ABC Construction Case: ABC Construction entered into a silent joint venture with
Stealth Construction. They bid on a $500,000 sewer-line project. ABC was awarded the
contract. The surety secured ABC's and Stealth's signatures on the indemnity
agreement before final bonds were issued. Subsequently, ABC suffers a financial
setback.
Subcontractors and suppliers make claims for $200,000 against the surety. Although
ABC's financial resources are exhausted, the obligee holds $50,000 of retainage on the
job. Which one of the following best represents the surety's right under the indemnity
agreement? - Correct Answer-The surety has the right to pursue both ABC and Stealth,
jointly and severally.
Contractor A bids a job at $8 million. Contractor B, Contractor C, and Contractor D bid
the job at $7.1 million, $7.0 million, and $6.9 respectively. In this case, most sureties
would apply the 10 percent rule to Contractor N.s bid and - Correct Answer-An average
of all of the above bids
Very Heavy Construction (VHC) is negotiating with Harper Realty to construct an office
building. Harper has secured short term construction financing and a long-term
mortgage. Harper has signed leases with ten tenants, each at $3,500 per month, with
occupancy beginning on November 1, 2004. The monthly revenue from the leases will
enable Harper to make its $32,000 monthly mortgage payment.
The construction terms of the contract require the contractor
to complete the building and have it ready for occupancy by October 15, 2004. The
liquidated damage clause states that VHC must pay $1,000 per day in damages for
each day the project goes unfinished beyond the completion date. VHC is thirty days
late. How much would VHC pay in damages to Harper Realty? - Correct Answer-
$30,000
Smith Contractors submits a bid bond request to the surety for a job to construct a
school addition. The Underwriting Memorandum -
includes the following:
Estimated bid for school addition - $1,500,000
Largest similar job completed - $1,100,000
Contract price of backlog - $360,000
Work on hand is 80% complete.
