Every section, shuffled

All 116 free questions in this run

1. When must an employer deposit federal unemployment tax owed for a quarter that requires a deposit?

   • A 15th of the month after the quarter The due date is the last day of the month following the quarter, not the fifteenth of that month.
   • B With the annual Form 940 The tax is deposited quarterly; the annual return reports it and is not itself the deposit deadline.
   • C With each payroll tax deposit Federal unemployment tax runs on its own quarterly schedule, not on the monthly or semiweekly schedule used for withheld income and social security taxes.
   • D End of the month after the quarter Correct

   By the last day of the first month after the quarter ends: federal unemployment (FUTA) tax owed for a quarter must be deposited by then (IRS Pub. 15 (2026), p. 44). The annual Form 940 reports the tax but is not the deposit deadline.

   IRS Pub. 15 (2026), p. 44 Reference document, not law.

2. When an employer discharges an employee, the Labor Code makes the earned and unpaid wages due:

   • A At the time of discharge Correct
   • B Within 72 hours of discharge 72 hours is the deadline in section 202 for an employee who quits without notice, and it has no application to a discharge.
   • C On the next regular payday Section 201 does not let a discharge wait for the next payday; the wages are payable at the time of discharge.
   • D Within seven calendar days Seven calendar days is the allowance in section 204(d) for a weekly, biweekly or semimonthly payroll, not a final pay deadline.

   At the time of discharge: wages earned and unpaid when an employee is fired are due and payable immediately (Lab. Code s. 201(a)). Holding the final check for the next regular payday makes the employer late already.

   Lab. Code s. 201(a)

3. To whom must a California employer send the Forms W-2 and W-2C it issues each year?

   • A Employees and the Franchise Tax Board The guide says not to send a copy of a W-2 or W-2C to the Franchise Tax Board.
   • B Employees and the Social Security Administration Correct
   • C Employees and the Employment Development Department The Employment Development Department already has the wage detail from the quarterly DE 9C, which is why the W-2 is not filed with it.
   • D The Social Security Administration only Employees must receive their copies too, so the Social Security Administration is not the only destination.

   Employees and the Social Security Administration get the Forms W-2 and W-2C (EDD DE 44 (2026), p. 79). The state already receives the wage detail on the quarterly DE 9C, which is why no copy goes to the Franchise Tax Board or the Employment Development Department.

   EDD DE 44 (2026), p. 79 Reference document, not law.

4. Which type of construction contract charges separately for the materials and for installing them?

   • A Time and material Correct
   • B Lump sum A lump sum contract sets one stated sum, even when the invoice lists materials and labor apart.
   • C Unit price Separate charges for materials and for installing them define time and material, not unit price.
   • D Guaranteed maximum cost A guaranteed maximum cost contract is not the type defined by separate charges for materials and installation.

   A time and material contract is the one that sets a separate charge for the materials or fixtures and for their installation or fabrication. A lump sum contract sets one stated price, and it stays a lump sum contract even when the invoice breaks out materials, labor or tax.

   CDTFA Pub. 9, p. 7 Reference document, not law.

5. A contractor willfully withholds a discharged worker's final pay for 45 days. At $240 a day, the waiting time penalty is:

   • A $2,400 $2,400 is 10 days at the daily rate, and the section fixes no 10 day figure; the penalty runs until payment, capped at 30 days.
   • B $7,200 Correct
   • C $10,800 $10,800 is the full 45 day delay, but the wages shall not continue for more than 30 days.
   • D $14,400 $14,400 is 60 days at the daily rate, and the section stops the penalty at 30 days.

   $7,200: a willfully withheld final paycheck runs on as a penalty at the same daily rate, but the law caps it at 30 days, and 30 days at $240 is $7,200 (Lab. Code s. 203(a)). Counting all 45 days of the delay overshoots the cap.

   Lab. Code s. 203(a)

6. Federal unemployment (FUTA) tax applies to each employee's wages for the calendar year only up to:

   • A $4,000 $4,000 stops the tax short of the $7,000 the statute counts.
   • B $5,000 $5,000 is below the $7,000 base the statute sets for each employee.
   • C $7,000 Correct
   • D $10,000 $10,000 overstates the $7,000 base the statute sets.

   The federal unemployment (FUTA) wage base is $7,000, because wages count for the tax only until $7,000 has been paid to the individual by the employer during the calendar year (26 U.S.C. s. 3306(b)(1)). A $5,000 base would leave the next $2,000 of a worker's wages untaxed.

   26 U.S.C. s. 3306(b)(1)

7. A drywall contractor pays a helper by the job to hang drywall on its own projects. Which ABC test condition do these facts show it cannot meet?

   • A Freedom from its control The facts say nothing about who directs the helper's work, so they do not show this condition failing.
   • B His own liability insurance Carrying insurance is not one of the three conditions of the ABC test.
   • C Work outside its usual business Correct
   • D An independent trade of his own The facts say nothing about whether the helper runs a trade of his own, so they do not show this condition failing.

   The work is not outside the usual course of the hiring entity's business, because hanging drywall is the drywall contractor's own trade, and the ABC test requires the person to perform work outside that usual course (Lab. Code s. 2775(b)(1)(B)). Insurance of his own is not one of the three conditions at all.

   Lab. Code s. 2775(b)(1)(B)

8. How soon must final wages be paid to an employee without a definite-term written contract who quits with no notice?

   • A At the time of quitting Payment at the time of quitting is owed only where the employee gave 72 hours previous notice of the intention to quit.
   • B Within 24 hours of quitting The section states no 24 hour deadline; the only figure it sets for a quit without notice is 72 hours.
   • C Within 72 hours of quitting Correct
   • D On the next regular payday Section 202 does not permit final wages to wait for the next regular payday.

   Within 72 hours: an employee without a written contract for a definite period who quits with no notice must be paid no later than 72 hours after quitting (Lab. Code s. 202(a)). Pay at the moment of quitting is owed only when the employee gave 72 hours' notice first.

   Lab. Code s. 202(a)

9. A contractor wants to pay its hourly field crews once a month for the prior month's work. How often must it pay them?

   • A Monthly, on a payday set in advance Designating the payday in advance satisfies only part of the section; wages are still due twice during each calendar month.
   • B Twice each calendar month Correct
   • C Monthly, within seven days of month end The seven day allowance in subdivision (d) applies to a weekly, biweekly or semimonthly payroll, and a monthly payroll is none of those.
   • D Every week The section sets a twice monthly floor, so weekly pay is permitted but never required.

   Twice each calendar month: hourly crews must be paid for the 1st to the 15th between the 16th and the 26th, and for the rest of the month by the 10th of the next (Lab. Code s. 204(a)). A single monthly payday, even one set in advance, pays the first half of the month too late.

   Lab. Code s. 204(a)

10. An employee works 11 hours at $34 an hour on the only workday of the week. The gross pay owed is:

    • A $374 This pays all 11 hours at the regular rate, but section 510(a) requires 'no less than one and one-half times the regular rate of pay' for work in excess of eight hours in one workday.
    • B $425 Correct
    • C $476 This doubles the three hours past eight, and section 510(a) reaches twice the regular rate only for 'work in excess of 12 hours in one day', which this workday never passes.
    • D $561 This pays every one of the 11 hours at one and one-half, but the premium reaches only the hours in excess of eight; the first eight are paid at the regular rate.

    $425: eight hours at the $34 regular rate, plus the three hours past eight at one and one-half times that rate (Lab. Code s. 510(a)). Double time starts only past 12 hours in a day, which this workday never reaches.

    Lab. Code s. 510(a)

11. If a contractor without an approved bond or joint control prices a home improvement job at $8,000, the largest down payment it may take is:

    • A $80 $80 is 1 percent of the price, not 10 percent.
    • B $500 $500 does not come from either limit of the cap.
    • C $800 Correct
    • D $1,000 $1,000 is the higher of the two limits here; the cap is whichever is less.

    The limit is $800, because a home improvement down payment may not exceed $1,000 or 10 percent of the contract amount, whichever is less, and 10 percent of $8,000 is $800 (Bus. & Prof. Code s. 7159.5(a)(3)). Only a contractor furnishing an approved performance and payment bond or joint control is exempt from that cap, and $1,000 is the ceiling only when 10 percent of the price would be more.

    Bus. & Prof. Code s. 7159.5(a)(3) and (8)

12. Until its account has a rating history, a new employer's unemployment insurance rate is:

    • A 2.0% No employer may have a rate other than 3.4 percent until its reserve account has the history the section requires, so 2.0 percent is not the starting rate.
    • B 3.4% Correct
    • C 4.0% The section holds the rate at 3.4 percent, neither more nor less, until the account qualifies, so 4.0 percent overstates it.
    • D 5.0% 5.0 percent is above the 3.4 percent the section fixes for an employer whose account has no rating history yet.

    3.4 percent: no employer may have a rate above or below 3.4 percent until its reserve account has carried benefit charges for the qualifying period (Unemp. Ins. Code s. 982(a)). A different rate, such as 2.0 percent, can come only once the account has that history.

    Unemp. Ins. Code s. 982(a)

13. A licensee's contractor license number must appear in which of the following sets of documents?

    • A Contracts, subcontracts, invoices, advertising Invoices are not on the section's list, and calls for bid are: the number goes in subcontracts and calls for bid alike.
    • B Contracts, subcontracts, calls for bid, advertising Correct
    • C Contracts, subcontracts, calls for bid, pay stubs Pay stubs are not on the section's list, and advertising of every kind is.
    • D Tax returns, subcontracts, calls for bid, advertising Tax returns are not on the section's list, and construction contracts head it.

    Construction contracts, subcontracts and calls for bid, and every form of advertising must carry the license number (Bus. & Prof. Code s. 7030.5). Invoices, pay stubs and tax returns are not on that list.

    Bus. & Prof. Code s. 7030.5

14. The contractor on a $30,000 home bathroom remodel has no approved bond or joint control. What is the most it may take as a down payment?

    • A $300 $300 is 1 percent of the price and is not either limit.
    • B $1,000 Correct
    • C $1,500 $1,500 is 5 percent of the price, which the cap does not use.
    • D $3,000 $3,000 is 10 percent of the price, but the cap is whichever limit is less, and $1,000 is less.

    The most is $1,000, because the down payment may not exceed $1,000 or 10 percent of the contract amount, whichever is less, and here 10 percent is $3,000 (Bus. & Prof. Code s. 7159.5(a)(3)). Only an approved bond or joint control lifts that cap, and taking $3,000 applies the greater of the two limits instead of the lesser.

    Bus. & Prof. Code s. 7159.5(a)(3) and (8)

15. A week after telling the foreman a trench is unshored, a laborer is laid off. Why is he protected?

    • A His oral complaint counts Correct
    • B An agency was told No agency was told on these facts, and the protection does not need one, since a complaint to 'their employer, or their representative' is covered.
    • C He complained in writing Nothing was written down here, and the protection reaches 'any oral or written complaint', so writing is not a condition.
    • D He is a committee member Committee participation is a separate protected act in paragraph (3), and it is not what happened on these facts.

    His oral complaint counts, because no one may fire or discriminate against an employee for an oral or written safety complaint to the employer (Lab. Code s. 6310(a)(1)). A written complaint is not a condition of the protection.

    Lab. Code s. 6310(a)(1)

16. What is the main business of a contractor licensed only in plumbing based on?

    • A Specialized building trades or crafts Correct
    • B Two or more unrelated trades Section 7057(a) defines the general building contractor by a structure 'requiring in its construction the use of at least two unrelated building trades or crafts'.
    • C Fixed works needing specialized engineering Section 7056 defines the general engineering contractor by 'fixed works requiring specialized engineering knowledge and skill'.
    • D Three or more unrelated trades At least three unrelated trades is the residential remodeling contractor's test in section 7057.5, not a specialty contractor's.

    Specialized building trades or crafts, because a contractor licensed only in plumbing is a specialty contractor, whose principal business uses them and whose work requires special skill (Bus. & Prof. Code s. 7058(a)). Two unrelated trades is the general building test.

    Bus. & Prof. Code s. 7058(a)

17. How many days does a job take if site prep runs 3 days, framing 9 and plumbing 5 both follow prep, and cleanup 2 follows both?

    • A 10 This follows the plumbing path, which is shorter, while framing still holds the job up longer.
    • B 12 This stops when framing ends and leaves off the cleanup that has to follow it.
    • C 14 Correct
    • D 19 This adds every task end to end, but framing and plumbing run at the same time after prep.

    The job takes 14 days, because framing and plumbing both start once prep ends and run at the same time, and cleanup waits for the longer of them: prep 3, framing 9, cleanup 2. The critical path method measures a job along that key path through every task, where any delay holds up the whole project (CSLB Law Book 2026, p. 65). Adding every task end to end ignores the overlap.

    CSLB Law Book 2026, p. 65

18. Records of federal employment taxes, such as wage payment dates and amounts withheld, should be kept for at least how many years?

    • A Two Two years is shorter than the retention the guide states, which is at least four years for employment tax records.
    • B Four Correct
    • C Five Five years is longer than the four years the guide asks employment tax records to be kept.
    • D Ten Ten years is more than twice the four years the guide asks employment tax records to be kept.

    Four years, because employers are told to keep all records of employment taxes for at least four years (IRS Pub. 15 (2026), p. 9). Two years falls short of that.

    IRS Pub. 15 (2026), p. 9 Reference document, not law.

19. Which item must an employer show on the itemized wage statement furnished to each employee?

    • A Gross wages earned Correct
    • B Full social security number Item (7) allows only the last four digits of the social security number, or another employee identification number, so a full number is the opposite of what the section requires.
    • C Year to date vacation balance A vacation balance appears nowhere in the nine items the section lists.
    • D The employee's home address Item (7) asks for the employee's name and only the last four digits of the social security number or an employee identification number; the employee's address is not among the nine items.

    Gross wages earned is one of the nine items the itemized wage statement must show (Lab. Code s. 226(a)). The statement may carry only the last four digits of the social security number, never the full number.

    Lab. Code s. 226(a)

20. An amputation happens on the job of a contractor that had six employees all last year and keeps no injury log. What must it still do?

    • A Report it immediately Correct
    • B Note it on the annual summary An employer excused from the records keeps no annual summary, and the report of a serious injury is due immediately in any case.
    • C Log the injury An employer with ten or fewer employees at all times last year does not need to keep the injury and illness records at all, so there is no log to enter this on.
    • D Wait for the insurer The report is due immediately, and nothing in the section makes it wait on an insurer.

    The contractor must still report the amputation immediately: the small-employer exemption lifts the injury log, not the duty to report a serious injury at once (8 CCR s. 14300.1(a)(1)). Waiting for the insurer delays a report that is due now.

    8 CCR s. 14300.1(a)(1)

21. A corporation's responsible managing employee leaves, and the corporation notifies the registrar but names no replacement. What happens to its license?

    • A It stays in good standing The subdivision imposes two duties on the same 90 days, notice and replacement, and failing the second suspends the license however promptly notice was given.
    • B Suspended 90 days after disassociation Correct
    • C Suspended on the disassociation date The suspension bites at the end of the 90 days, so the licensee has that period to name a replacement.
    • D Suspended 30 days after disassociation The period in section 7068.2(a) is 90 days; 30 days is the window in section 7076.2 for a lapsed Secretary of State registration.

    The license is suspended when the 90 days end, because notice alone does not replace the qualifier (Bus. & Prof. Code s. 7068.2(a)). The licensee has the full 90 days to name a replacement, and the suspension does not start on the disassociation date itself.

    Bus. & Prof. Code s. 7068.2(a)

22. Before digging, how much notice must an excavator give the regional notification center for the area?

    • A 30 calendar days Thirty calendar days has no basis in this subsection, which counts in working days and sets 2 as the floor.
    • B Two full weeks Two weeks is far longer than the stated minimum and appears nowhere in the subsection.
    • C 3 working days The subsection states 2 working days, not 3; no three day period appears in section 1541.
    • D 2 working days Correct

    Two working days: the regional notification center must hear of the work at least 2 working days before digging starts (8 CCR s. 1541(b)(2)). Three working days is not the rule's figure.

    8 CCR s. 1541(b)(2)

23. The Form 300A annual summary of injuries and illnesses must stay posted at the establishment:

    • A From February 1 through April 30 Correct
    • B From January 1 through March 31 January 1 is not the posting date; the summary goes up 'no later than February 1 of the year following the year covered by the records'.
    • C From February 1 through March 1 March 1 is not the end of the window, which runs 'until April 30'.
    • D Throughout the following calendar year The posting duty ends on April 30, so nothing requires the summary to stay up for the whole year.

    From February 1 through April 30, because the annual summary must go up no later than February 1 of the next year and stay posted until April 30 (8 CCR s. 14300.32(b)(6)). Taking it down on March 1 ends the posting too soon.

    8 CCR s. 14300.32(b)(6)

24. A crew works in an excavation 4 1/2 feet deep, not in stable rock, that no competent person has examined. Cave-in protection is:

    • A Not needed under 5 feet deep The exception reads 'Excavations are less than 5 feet in depth and examination of the ground by a competent person provides no indication of a potential cave-in', so the examination is part of it.
    • B Not needed until 6 feet deep Six feet is not the cave-in figure; the depth named in the exception is 5 feet, and 6 feet belongs to the crossing walkway rule in section 1541(l)(1).
    • C Needed in any excavation, even rock The subsection carries two express exceptions, stable rock and the examined excavation under 5 feet, so protection is not required without exception.
    • D Needed until examined and found safe Correct

    Protection is needed until a competent person examines the ground and finds no sign of a cave-in: under 5 feet the exception needs that finding, and this excavation has none (8 CCR s. 1541.1(a)(1)). Depth under 5 feet does not excuse it on its own.

    8 CCR s. 1541.1(a)(1)

25. How many hours a week must a responsible managing employee work to count as actively engaged in the applicant's business?

    • A 20 hours, or 50 percent if less Section 7068(c)(2)(B) sets the figures at 32 hours and 80 percent; 20 hours and 50 percent appear nowhere in the definition.
    • B 32 hours, or 80 percent if less Correct
    • C 32 hours, or 80 percent if more The statute says whichever is less, so reading it as the greater would demand 32 hours from a business open fewer hours.
    • D 40 hours, or 80 percent if less The hours figure in the definition is 32 per week, not 40.

    32 hours a week, or 80 percent of the hours the business operates if that is less (Bus. & Prof. Code s. 7068(c)(2)(B)). The definition says whichever is less, and neither 20 hours nor 40 appears in it.

    Bus. & Prof. Code s. 7068(c)(2)(B)

26. Why should a contractor put a commercial remodel agreement in writing even where no statute requires it?

    • A It records true intent Correct
    • B It cannot be canceled Cancellation rights come from the Civil Code home solicitation provisions and turn on how and where the sale was made, not on whether the agreement is written.
    • C It extends lien time Lien deadlines run from completion or cessation of the work, and putting the agreement in writing does not lengthen them.
    • D It bars the owner from suing A written agreement does not take away either party's right to sue; it is what a judge or arbitrator reads if they do.

    It records true intent, because an arbitrator or judge asked to interpret the agreement is more likely to find in line with the parties' true intent when it is in writing (CSLB Law Book 2026, p. 70). Putting it in writing does not extend any lien deadline.

    CSLB Law Book 2026, p. 70

27. On a construction site, supervisors must hold toolbox or tailgate safety meetings with their crews at least:

    • A Every working day A daily meeting is not required; the interval stated in the subsection is at least every 10 working days.
    • B Once a week Weekly is common industry practice but it is not the regulation's figure, which is stated in working days rather than weeks.
    • C Every 10 working days Correct
    • D Once each calendar month A calendar month runs longer than 10 working days, so a monthly meeting misses the required interval.

    At least every 10 working days, because supervisors must hold toolbox or tailgate meetings with their crews at that interval (8 CCR s. 1509(e)). A monthly meeting falls short of it.

    8 CCR s. 1509(e)

28. In any one-year period, one qualifying individual may serve as qualifier for at most how many separate firms?

    • A Two Section 7068.1(b) sets the ceiling at three firms, so two understates what the statute allows.
    • B Three Correct
    • C Four Four exceeds the express limit of three firms in any one-year period.
    • D No limit under common ownership The subdivision opens notwithstanding the ownership paragraphs, so meeting the common ownership test does not lift the three-firm ceiling.

    One qualifier may serve at most three firms in any one-year period, even where the firms share ownership (Bus. & Prof. Code s. 7068.1(b)). The ceiling applies notwithstanding the common ownership rules, and four firms is one more than it allows.

    Bus. & Prof. Code s. 7068.1(b)

29. In what form must every employer keep its Injury and Illness Prevention Program (IIPP)?

    • A In writing Correct
    • B Written or oral The regulation states that the program shall be in writing, so an oral version never meets it.
    • C Oral, with a crew sign-off A crew sign-off does not replace the written program the regulation requires.
    • D Posted at each job site The regulation asks for a written program and sets no job site posting in its place.

    In writing: every employer must have an Injury and Illness Prevention Program, and it must be written (8 CCR s. 3203(a)). An oral program does not meet it.

    8 CCR s. 3203(a)

30. On a public works contract, who must pay the specified prevailing rates to workers on the job?

    • A The awarded contractor alone The section names the awarded contractor and any subcontractor under it, so the duty is not the prime's alone.
    • B The awarded contractor and every subcontractor Correct
    • C The awarding body, through the contractor The awarding body states the rates in its call for bids; s. 1774 places the payment duty on the contractor and its subcontractors.
    • D Only subcontractors employing covered trade workers The section reaches all workers employed in executing the contract, so the prime owes the rate as well.

    The awarded contractor and every subcontractor under it must pay not less than the specified prevailing rates to all workers employed on the contract (Lab. Code s. 1774). The duty is not the prime's alone; it runs down to every subcontractor.

    Lab. Code s. 1774

31. How should an estimate treat fuel, lubricants, general maintenance and small tools used on a job?

    • A General office overhead The passage says these indirect costs may be charged to the project, and overhead is described separately as office rental, supplies and wages, advertising, bad debts and other general administrative costs.
    • B Indirect costs of the job Correct
    • C Other direct costs, like permits Permits, fees, interest, loan charges, equipment and additional insurance are listed as the other direct costs, a separate group from these indirect items.
    • D Labor costs by work classification Labor costs are calculated according to work classification and cover the hourly rate, payroll taxes, benefits, vacation pay and required insurance, none of which is fuel, maintenance or small tools.

    They are indirect costs that may be charged to the project and should not be overlooked (CSLB Law Book 2026, p. 64). They are not general office overhead, which covers items such as office rental, advertising and bad debts.

    CSLB Law Book 2026, p. 64

32. A contractor installs materials bought from an out-of-state supplier that charged no California tax. The use tax is owed by:

    • A The installing contractor Correct
    • B The out-of-state supplier The tax falls on the person storing, using or consuming the property in this state, and the out-of-state supplier did none of those things here.
    • C The property owner The contractor bought the materials and used them by installing them, so the liability is the contractor's, not the owner's.
    • D The job's lender A lender finances the job and neither buys nor uses the materials.

    The installing contractor, because every person storing, using or consuming in this state property bought from a retailer owes the use tax, and installing the materials is that use (Rev. & Tax. Code s. 6202(a)). The out-of-state supplier charged no California tax and did not use the materials here.

    Rev. & Tax. Code s. 6202(a)

33. A contractor bought an excavator four years ago, and similar machines now sell for far more. On its balance sheet, the excavator is carried at:

    • A Original cost less accumulated depreciation Correct
    • B Its current market value Market value is the reading the source rules out in terms: fixed assets are valued at cost less depreciation 'regardless of their current market value'.
    • C Original cost with no depreciation Cost is only half the measure. Accumulated depreciation is subtracted from it, so a four-year-old machine is not carried at full cost.
    • D Replacement cost of a similar machine Replacement cost is another current-value measure, and the valuation rule ignores current values.

    Original cost less accumulated depreciation, because fixed assets are valued that way regardless of their current market value (CSLB Law Book 2026, p. 54). A higher price for similar machines today does not change the figure carried.

    CSLB Law Book 2026, p. 54

34. An employer with no workers' compensation coverage is served a stop order and requests a hearing. The order takes effect:

    • A On service Correct
    • B Once the hearing confirms it The order stands once it is served; the hearing comes afterward and can only affirm or dismiss it.
    • C Twenty days after service Twenty days is the period for requesting a hearing, and it does not delay the order.
    • D Ten days after service Ten days is the most lost pay the employer owes the affected employees, not a delay in the order.

    On service, because a stop order becomes effective immediately upon service and runs until the employer secures compensation (Lab. Code s. 3710.1). Asking for a hearing does not hold it off.

    Lab. Code s. 3710.1

35. The financing that fits payroll and material costs on an awarded job before the first progress payment is:

    • A A bank line of credit Correct
    • B Long-term bank equipment financing Long-term bank financing is offered against financial planning for capital needs, and it does not match a gap that closes with the first progress payment.
    • C Equity funds from an outside investor Equity funds cost the owner some control and a share of future profits, which is a heavy price for a short working capital need.
    • D A direct Small Business Administration loan The same page says the Small Business Administration 'does not make direct loans, but it does guarantee repayment of a loan'.

    A bank line of credit: through it a commercial bank provides the working capital to complete an awarded contract, repaid when the contractor is paid (CSLB Law Book 2026, p. 63). Equity from an outside investor costs control and a share of profits to cover a short gap.

    CSLB Law Book 2026, p. 63

36. Which statement most accurately describes the difference between equity funds and debt as sources of financing for a contracting business?

    • A Equity costs some control and stays invested Correct
    • B Debt costs some control and stays invested The two halves are reversed. With debt 'the owner does not normally give up control of the business', and borrowed money is repaid rather than left in.
    • C Equity is repaid with periodic interest Repayment of the original amount with periodic interest is what debt requires. Equity funds remain in the business.
    • D Equity investors share no future profits Equity investors acquire 'a share of future profits', which is the price the owner pays for money that stays in.

    Equity money comes from investors who take a measure of control and a claim on later profits, and it stays in the business, while debt must be repaid with interest and normally leaves the owner's control untouched.

    CSLB Law Book 2026, p. 62

37. A supplier first delivered March 1, gave no preliminary notice until June 20, and kept delivering. Its lien covers:

    • A Nothing at all Late service cuts the claim back rather than destroying it; s. 8204(a) expressly allows notice at any time after the deadline.
    • B Work from May 31 onward Correct
    • C Only work after June 20 The statute reaches back 20 days before service, so deliveries between May 31 and June 20 stay in the claim.
    • D Its whole account Nothing in s. 8204 cures the delay; the 20-day look-back is the whole of what a late claimant keeps.

    From May 31 on, because a late preliminary notice still supports a lien for work done in the 20 days before it was served and after (Civ. Code s. 8204(a)). Losing the whole claim overstates what serving late costs.

    Civ. Code s. 8204(a)

38. A claimant who has recorded a valid claim of lien must sue to enforce it within how many days of recording?

    • A 30 30 days is a lien recording window under s. 8414(b)(2), not the period for filing suit.
    • B 60 60 days is the direct contractor's recording window under s. 8412(b) once a notice of completion is recorded.
    • C 90 Correct
    • D 120 No 120-day period exists in the chapter; the only extension is the recorded credit agreement in s. 8460(b).

    90 days: a claimant must sue to enforce its lien within 90 days of recording, or the claim of lien expires (Civ. Code s. 8460(a)). Thirty and 60 days are recording windows, not the time to sue.

    Civ. Code s. 8460(a)

39. Work is completed May 28, and the owner records a notice of completion June 1. A subcontractor's last day to record its lien is:

    • A June 11 June 11 is 10 days after the recording, which is the owner's deadline for serving copies under s. 8190(a), not the claimant's lien deadline.
    • B July 1 Correct
    • C July 31 July 31 is 60 days after the recording, the figure s. 8412(b) gives the direct contractor rather than a subcontractor.
    • D August 26 August 26 is 90 days after completion, and s. 8414(b) takes the earlier of that and the 30-day date once a notice is recorded.

    July 1: a subcontractor must record before the earlier of 90 days after completion or 30 days after the owner records a notice of completion, and 30 days after June 1 is July 1 (Civ. Code s. 8414(b)(2)). August 26, 90 days after completion, is the later date and does not control.

    Civ. Code s. 8414(b)(2)

40. After a private work of improvement is completed, the owner may record an effective notice of completion:

    • A Within 10 days 10 days is the owner's deadline under s. 8190(a) for giving copies of the notice, not the window for recording it.
    • B Within 15 days Correct
    • C Within 20 days 20 days is the preliminary notice deadline in s. 8204(a) and has nothing to do with recording a notice of completion.
    • D Within 30 days 30 days is the cessation period in s. 8188(a) that lets an owner record a notice of cessation.

    Within 15 days, because an owner may record a notice of completion only on the completion date or within 15 days after it (Civ. Code s. 8182(a)). Thirty days is not the recording window.

    Civ. Code s. 8182(a)

41. When a private owner that has recorded no payment bond receives a stop payment notice, from which party's payments must it withhold enough to pay the claim?

    • A The direct contractor Correct
    • B The construction lender A construction lender has its own duty when it receives a notice; the owner's duty is to hold back what it owes the direct contractor.
    • C The claimant giving the notice The claimant giving the notice is the party the withheld money is meant to pay, not the party it is withheld from.
    • D The owner's architect The owner's architect may receive the notice on the owner's behalf, but the owner does not make payments to the architect for the work.

    The owner holds back money due to the direct contractor, because on receipt of a stop payment notice an owner must withhold from the direct contractor enough of what is due or will become due to pay the claim (Civ. Code s. 8522(a)). Only an owner that has recorded a payment bond may choose not to withhold, and the claimant is the one paid from those funds, not the one whose money is held.

    Civ. Code s. 8522(a)

42. Which signed withholding forms must a California employer obtain from a new hire and keep in its payroll records?

    • A Form W-9 and DE 9 A Form W-9 collects a taxpayer identification number from a payee such as a subcontractor; a new employee completes a Form W-4.
    • B Form 1099 and DE 542 A Form 1099 reports payments to someone who is not an employee, so it is not a withholding form a new hire signs.
    • C Form W-4 and DE 4 Correct
    • D Form I-9 and DE 34 The DE 34 is the employer's own report of a new employee to the state, not a withholding form the new hire signs.

    The federal Form W-4 and the state DE 4: an employer must keep both in its payroll records (EDD DE 44 (2026), p. 25). The DE 34 is the new-hire report the employer files, not a form the employee signs.

    EDD DE 44 (2026), p. 25 Reference document, not law.

43. A business that files an information return reporting payments it made during the year must also:

    • A Send a copy to its bank The copy is owed to the recipient or payer named on the return, which is what lets that person report the same figure.
    • B Keep the only copy on file Keeping the return in the file leaves the payee with nothing, and the publication requires the copy to be given out.
    • C Post a copy at the job site Nothing asks for a posting; the copy goes to the recipient or payer named on the return.
    • D Give a copy to the recipient Correct

    Give a copy to the recipient: a business must give a copy of each information return it is required to file to the recipient or payer (IRS Pub. 583, p. 8). Keeping the only copy on file leaves the payee without one.

    IRS Pub. 583, p. 8 Reference document, not law.

44. On a quarter's taxable wages of $44,000, the employer's own share of social security tax is:

    • A $638 $638 applies 1.45 percent, which is the Medicare rate and not the social security rate.
    • B $2,728 Correct
    • C $3,366 $3,366 applies 7.65 percent, the employer's social security and Medicare shares added together, where the question asks for social security alone.
    • D $5,456 $5,456 applies 12.4 percent, which is both halves of the social security tax, and the employer's own share is one of them.

    $2,728: the 6.2 percent social security rate applies to the employer and the employee each, and the employer's 6.2 percent of $44,000 is $2,728 (IRS Pub. 15 (2026), p. 29). Adding the Medicare rate or the employee's half gives more than the employer's own share.

    IRS Pub. 15 (2026), p. 29 Reference document, not law.

45. A home improvement contract's payment schedule reads "Payment 2: rough-in complete, 30 percent of contract price." What is wrong with that line?

    • A Not stated in dollars Correct
    • B Names the wrong trade Rough-in is a normal payment stage, and the paragraph regulates how the payment is expressed rather than which trade is named.
    • C Lacks the buyer's initials No initialing of the progress payment schedule is required; the paragraph asks for dollars and cents and a reference to the work covered.
    • D Not paid in advance Progress payments follow the work, and the downpayment rules for a home improvement contract are set separately in the same section.

    The payment is not stated in dollars: each progress payment must be stated in dollars and cents and tied to the work it covers (Bus. & Prof. Code s. 7159(d)(9)(B)). No buyer's initials are required on the schedule.

    Bus. & Prof. Code s. 7159(d)(9)(B)

46. A monthly schedule depositor must deposit the employment taxes on one month's wages by this day of the following month:

    • A The 10th The monthly schedule gives until the 15th of the next month, not the 10th.
    • B The 15th Correct
    • C The 20th The 20th is five days past the monthly deadline, which falls on the 15th.
    • D The 25th The 25th is ten days past the monthly deadline, which falls on the 15th; no deposit rule uses it.

    The 15th is the deadline, because a monthly depositor must deposit the employment taxes accumulated on a calendar month's payments by the 15th day of the next month (26 CFR s. 31.6302-1(c)(1)). The 10th and the 20th are not dates the monthly schedule uses.

    26 CFR s. 31.6302-1(c)(1)

47. What route does a buyer have when a home improvement contract leaves out the required Notice of Cancellation?

    • A Complain to the Contractors State License Board Correct
    • B Sue the contractor for actual damages only The paragraph names a complaint to the board as the buyer's route and does not confine the buyer to a damages suit.
    • C Accept a late copy of the notice A copy handed over later does not cure the defect, because the notice has to be in or attached to the contract as the section requires.
    • D Treat the contract as automatically void The paragraph gives a complaint route rather than voiding the contract, and the buyer's cancellation right sits in the Civil Code sections.

    A complaint to the Contractors State License Board: that is the route the law gives a buyer whose contract leaves out the Notice of Cancellation (Bus. & Prof. Code s. 7159(a)(6)). The omission does not make the contract void.

    Bus. & Prof. Code s. 7159(a)(6)

48. Which factor decides whether an employer deposits its federal payroll taxes on a monthly or a semiweekly schedule?

    • A How often it pays its crews Pay frequency does not set the schedule. The determination looks at the amount of employment taxes reported for the lookback period.
    • B The number of employees it has Headcount is not the test. A small crew with a large payroll can owe more tax than a large crew with a small one, and the tax reported is what counts.
    • C Its reported employment taxes Correct
    • D How many years it has operated Time in business is not a factor the regulation names. The schedule for each year follows the taxes reported for the lookback period.

    The taxes reported for the lookback period decide it, because whether an employer is a monthly or semiweekly depositor for a year is an annual determination based on the employment taxes it reported for that period (26 CFR s. 31.6302-1(b)(1)). How often the crew is paid does not enter into it.

    26 CFR s. 31.6302-1(b)(1)

49. Employment taxes of $62,000 were reported for a contractor's lookback period. Which deposit schedule applies to it this year?

    • A Monthly Monthly deposits are for a lookback total of $50,000 or less, and $62,000 is over that line.
    • B Quarterly The regulation sorts every employer into one of two schedules, monthly or semiweekly. Quarterly is neither.
    • C Next-day The next-day rule is set off by $100,000 piling up on a single day, not by the lookback total.
    • D Semiweekly Correct

    Semiweekly applies for the whole year, because an employer whose lookback-period employment taxes exceed $50,000 is a semiweekly depositor for the entire calendar year (26 CFR s. 31.6302-1(b)(3)). The monthly schedule is only for totals of $50,000 or less.

    26 CFR s. 31.6302-1(b)(3)

50. To treat a worker as an independent contractor, which ABC test condition must the hiring entity prove?

    • A A signed independent contractor agreement The condition looks at control both under the contract and in fact, so a signed agreement on its own does not meet it.
    • B Freedom from the entity's control Correct
    • C Payment by the job How the worker is paid is not a condition of the ABC test.
    • D Ownership of the tools Owning the tools is not a condition of the ABC test.

    Freedom from the entity's control is a condition it must prove, because the person has to be free from the hiring entity's control and direction in performing the work, both under the contract and in fact (Lab. Code s. 2775(b)(1)(A)). A signed agreement alone cannot show freedom in fact.

    Lab. Code s. 2775(b)(1)(A)

51. A prime contractor's progress payment includes $4,000 for a subcontractor, $1,000 of it in good faith dispute. Absent a contrary written agreement, the prime must pay the subcontractor at least:

    • A $1,500 $1,500 is the maximum the prime contractor may withhold, not the amount it must pay.
    • B $2,500 Correct
    • C $3,000 Paying $3,000 holds back only the $1,000 in dispute, and the statute allows a holdback of up to 150 percent of that amount, so the smallest lawful payment is $2,500.
    • D $4,000 Paying the full $4,000 ignores the withholding the statute allows, and the question asks for the smallest lawful payment.

    $2,500: the prime may withhold no more than 150 percent of the $1,000 in good faith dispute, which is $1,500, and must pay the other $2,500 within seven days (Bus. & Prof. Code s. 7108.5(a)). Paying $3,000 holds back less than the law allows and is not the least the prime must pay.

    Bus. & Prof. Code s. 7108.5(a)

52. A contractor will remove sprayed-on ceiling material in a 1975 office building. What must it do before its crew starts?

    • A Identify asbestos location and quantity Correct
    • B Give the owner a risk assessment A licensed contractor may not perform any asbestos risk assessment (Bus. & Prof. Code s. 7180(b)); its duty before work is to identify the presence, location and quantity of the material.
    • C Notify its compensation insurer The duty is to identify the material before work; no notice to an insurer is part of it.
    • D Wait for a state inspection The employer identifies the material itself before work; no state inspection is required first.

    Identify the asbestos: before work begins in an area with known or presumed asbestos, the employer must identify its presence, location and quantity (8 CCR s. 1529(k)(3)(A)). No state inspection has to come first.

    8 CCR s. 1529(k)(3)(A)

53. A homeowner aged 70 signs a $22,000 remodel contract at her kitchen table and receives the signed, dated copy that day. She may cancel until midnight of:

    • A The third business day Three business days is the ordinary right to cancel, and it is replaced by five business days once the buyer is 65 or older.
    • B The fifth business day Correct
    • C The fifth calendar day The period is counted in business days, so weekends and holidays are excluded and a calendar-day count shortens the buyer's rights.
    • D The seventh business day Seven business days is the disaster right that applies to repair or restoration after a declared emergency, and no emergency was declared here.

    The fifth business day, because for a senior citizen buyer every "three" and "third" in the cancellation notice becomes "five" and "fifth" (Bus. & Prof. Code s. 7159(e)(6)(B)(ii)). Three business days is the ordinary right, and a calendar-day count is not the measure.

    Bus. & Prof. Code s. 7159(e)(6)(B)(ii)

54. On a home improvement job, at what point must the buyer receive a contract copy that both parties have signed and dated?

    • A Within three business days Three business days is the ordinary cancellation window, not a delivery deadline; the copy must be handed over before work starts, whenever that falls.
    • B Before any work starts Correct
    • C Before the first payment Nothing ties delivery of the signed copy to a payment request; the statute fixes the deadline at the start of work.
    • D Within 10 days Ten days is the period for returning a canceling buyer's money, and the statute sets no 10-day window for delivering the contract copy.

    Before any work starts: the contractor must give the buyer a copy of the contract signed and dated by both parties before any work is started (Bus. & Prof. Code s. 7159(c)(3)(A)). Tying delivery to the first payment is not the rule.

    Bus. & Prof. Code s. 7159(c)(3)(A)

55. The Labor Code requires payroll records showing daily hours worked, wages paid and piece-rate units earned to be kept on file for at least how many years?

    • A One One year is a third of the floor; the section keeps these records on file for not less than three years.
    • B Two Two years falls below the statutory floor, which the section fixes at not less than three years.
    • C Three Correct
    • D Seven Seven years is longer than the three-year floor the section sets.

    Three years: payroll records showing daily hours, wages and piece-rate units must be kept on file for not less than three years (Lab. Code s. 1174(d)). Two years falls short of that floor.

    Lab. Code s. 1174(d)

56. To become part of a home improvement contract, a written change order for extra work must be signed by both parties:

    • A Before the covered work starts Correct
    • B Within three business days Three business days is a cancellation period, not a signing window; the change order must be signed before any covered work begins.
    • C Before the next progress payment The next progress payment has nothing to do with it; signatures given after the covered work has begun leave the change order outside the contract.
    • D Before final completion Final completion comes after the work is done, and the statute requires the signatures before the covered work begins.

    Both parties must sign the written change order before any of the work it covers starts, and only then does it become part of the contract (Bus. & Prof. Code s. 7159(c)(5)). Signing before the next progress payment is too late once the extra work has begun.

    Bus. & Prof. Code s. 7159(c)(5)

57. An agreement to improve a home becomes a home improvement contract, with its required contents, once the total contract price is:

    • A More than $500 Correct
    • B More than $750 $750 is the ceiling on a service and repair contract under section 7159.10(a)(1)(A), not the trigger for the home improvement contract rules.
    • C More than $1,000 $1,000 is the dollar ceiling on a home improvement downpayment under section 7159.5(a)(3), a separate rule about how much may be collected up front.
    • D More than $5,000 $5,000 is the value at or below which a home improvement contract may not provide for a security interest in real property under section 7159.2(a).

    More than $500, because an agreement is a home improvement contract only once its total price for labor, services and materials exceeds $500 (Bus. & Prof. Code s. 7159(b)). Neither $750 nor $1,000 is the trigger.

    Bus. & Prof. Code s. 7159(b)

58. Which two California payroll taxes are employer contributions due quarterly rather than amounts withheld from employee wages?

    • A Unemployment insurance and state disability insurance State disability insurance is withheld from employee wages, so it is not one of the two employer contributions.
    • B Employment training tax and personal income tax Personal income tax is withheld from employee wages, so this pairing puts a withholding among the employer contributions.
    • C Unemployment insurance and employment training tax Correct
    • D State disability insurance and personal income tax Both of these come out of employee wages, and the guide says those withholdings 'may need to be deposited more often' than quarterly.

    Unemployment insurance and the employment training tax are the employer's own contributions, due quarterly (EDD DE 44 (2026), p. 68). State disability insurance and personal income tax are withheld from employee wages, which is why they may need depositing more often.

    EDD DE 44 (2026), p. 68 Reference document, not law.

59. Which lookback period decides whether a Form 941 filer deposits federal payroll taxes monthly or semiweekly?

    • A January through December this year The lookback period closes on June 30, before the calendar year starts, so the current year's own quarters are not it.
    • B July 1 through June 30 Correct
    • C January through December last year For a Form 941 filer the lookback runs from July 1 to June 30 across two calendar years, not over the immediately preceding calendar year.
    • D The most recent single quarter The publication reads the total taxes reported across four quarters of the lookback period, so a single recent quarter does not set the schedule.

    July 1 through June 30: a Form 941 filer's deposit schedule for the year is set by the taxes it reported in that lookback period (IRS Pub. 15 (2026), p. 32). The current calendar year is not the lookback period; the lookback that sets the schedule closes on the June 30 before the year starts.

    IRS Pub. 15 (2026), p. 32 Reference document, not law.

60. A handyman agrees to replace deck boards for $850 in total and neither advertises nor hires help. What decides whether the job is exempt from licensing?

    • A Labor under $1,000, no permit The $1,000 line is measured on the aggregate price for labor, materials and all other items, not on labor alone.
    • B Price under $500, no permit The minor work line is $1,000, not $500.
    • C Price under $1,000, with permit Work that needs a building permit is outside the exemption whatever its price.
    • D Price under $1,000, no permit Correct

    The job is exempt only while the whole price stays under $1,000 and no building permit is needed (Bus. & Prof. Code s. 7048(a)). The price counts labor, materials and all other items together, and a job that needs a permit loses the exemption at any price.

    Bus. & Prof. Code s. 7048(a)

61. Which production scheduling method better shows how the tasks that make up a job depend on one another?

    • A The bar chart method A bar chart shows start and finish times but overlooks some interrelated tasks.
    • B A milestone date list A list of milestone dates marks targets; it does not tie the tasks to one another.
    • C The critical path method Correct
    • D The progress payment schedule A payment schedule sets when money is due; it does not tie the job's tasks to one another.

    The critical path method, because it is the more complex tool that better interrelates the tasks of a job. A bar chart shows each task's start and finish but overlooks some interrelated tasks.

    CSLB Law Book 2026, p. 65

62. In what sum must an applicant or licensee file the contractor's bond the board requires before it issues or renews a license?

    • A $12,500 No figure of this size appears in section 7071.6; the contractor's bond is set at $25,000.
    • B $15,000 $15,000 falls short of the bond the section requires, which section 7071.6(a) fixes at $25,000.
    • C $25,000 Correct
    • D $100,000 $100,000 is the limited liability company employee wage bond under section 7071.6.5, which is in addition to the contractor's bond.

    $25,000, filed before the license issues or renews, because the board requires it as a condition of issuing, renewing and keeping a license (Bus. & Prof. Code s. 7071.6(a)). $100,000 is not its amount.

    Bus. & Prof. Code s. 7071.6(a)

63. The notice every employer covered by workers' compensation must keep conspicuously posted must show:

    • A The policy declarations page The section calls for a notice whose form and content the administrative director prescribes, not for the insurer's policy documents.
    • B Covered employees and policy numbers Nothing in the section asks for a list of covered employees or a policy number; it asks for the carrier's name or the self-insured status.
    • C A schedule of benefit amounts by injury The prescribed notice describes rights and how to get care, and it does not set out benefit amounts by type of injury.
    • D The carrier's name and who adjusts claims Correct

    The carrier's name and who adjusts claims: the posted notice names the current compensation carrier, or says the employer is self-insured, and says who handles claims (Lab. Code s. 3550(a)). It lists no covered employees and no policy numbers.

    Lab. Code s. 3550(a)

64. A corporation's responsible managing officer owns 12 percent of its voting stock and certifies that fact on the registrar's form. What applies to the qualifying individual's bond?

    • A Required in every case Section 7071.9(c) is an express exemption for a certifying officer with 10 percent or more of the voting stock, so the bond duty is not absolute.
    • B Excused at 10 percent or more Correct
    • C Combined with the contractor's bond Section 7071.9(a) says the qualifying individual's bond is in addition to, and shall not be combined with, the contractor's bond.
    • D Required below 20 percent of stock The threshold in that subdivision is 10 percent; the 20 percent figure is the common ownership test in section 7068.1.

    Excused: a responsible managing officer who owns 10 percent or more of the voting stock and certifies it on the registrar's form files no qualifying individual's bond (Bus. & Prof. Code s. 7071.9(c)). A 12 percent holding clears that line, and no 20 percent test applies to this bond.

    Bus. & Prof. Code s. 7071.9(c)

65. When must a new contracting business register with the Employment Development Department after becoming a subject employer?

    • A Within 30 days The guide gives 15 days, not 30, for registering after becoming a subject employer.
    • B 15 days after its first payday The trigger is becoming a subject employer, so the count starts there and not at the first payday.
    • C Within 15 days Correct
    • D By the quarter's last day The guide sets a day count from subject employer status rather than a quarter-end deadline.

    Within 15 days: a new employer must register with the Employment Development Department (EDD) within 15 days of becoming a subject employer (EDD DE 44 (2026), p. 10). The count starts at subject employer status, not at the first payday.

    EDD DE 44 (2026), p. 10 Reference document, not law.

66. For employees damaged by unpaid wages, a limited liability company holding a contractor's license must keep on file a bond of:

    • A $15,000 No bond of this size appears in section 7071.6.5; the employee bond is set at $100,000.
    • B $25,000 $25,000 is the contractor's bond under section 7071.6, which the limited liability company carries as well as the employee bond.
    • C $100,000 Correct
    • D $1,000,000 $1,000,000 is the ceiling on personal liability of listed personnel while a limited liability company license is suspended under section 7076.2(b), not a bond amount.

    $100,000: a limited liability company license requires a surety bond in that sum on file (Bus. & Prof. Code s. 7071.6.5(a)). It is separate from the contractor's bond, and $25,000 is not its amount.

    Bus. & Prof. Code s. 7071.6.5(a)

67. How much experience must an applicant for a contractor license show in the class applied for, and over what period?

    • A Two years within the last five Neither the two-year figure nor the five-year window appears in the rule, which sets four years within 10.
    • B Four years within the last four The lookback period in the rule is 10 years, not four, so this collapses the window into the requirement.
    • C Four years within the last 10 Correct
    • D Six years within the last 10 The rule requires not less than four years of experience, so six years overstates the minimum.

    Four years of journey-level experience within the last 10 (16 CCR s. 825(a)). The experience must be as a journeyman, foreman, supervising employee or contractor in the class applied for, and neither two years nor a five-year window appears in the rule.

    16 CCR s. 825(a)

68. What fine and jail term must the court impose on a person convicted a second time of contracting without a license, where the case is not unusual?

    • A Up to $1,000 or 30 days No conviction tier carries a $1,000 cap or a 30-day term; a second conviction starts at $5,000 and 90 days.
    • B Up to $5,000 or six months That is the first-conviction penalty, a ceiling rather than a floor; a second conviction sets floors.
    • C At least $5,000 and 90 days Correct
    • D At least $10,000 and a year No tier sets a $10,000 floor, and a year is the most jail a third conviction can bring, not a second conviction's minimum.

    At least $5,000 and at least 90 days in county jail: the fine is 20 percent of the contract price or of the payments, or $5,000, whichever is greater (Bus. & Prof. Code s. 7028(c)). The court may go lower only in an unusual case, and a ceiling of $5,000 or six months is not what a second conviction carries.

    Bus. & Prof. Code s. 7028(c)

69. Which step must every employer take to verify that a new hire is eligible to work in the United States?

    • A Completing Form W-4 The publication asks each new employee to complete a Form W-4 separately, and that form sets withholding rather than verifying eligibility for employment.
    • B Using Social Security number verification The publication describes that service as something the employer may use to match a name to a social security number, and notes a person may have a valid number without being authorized to work.
    • C Completing Form I-9 Correct
    • D Checking the hire through E-Verify The publication says an employer may use E-Verify to confirm employment eligibility, so it is optional and does not replace the Form I-9.

    Completing Form I-9, Employment Eligibility Verification, is the step every employer must take to verify a new hire's eligibility to work (IRS Pub. 15 (2026), p. 7). E-Verify and the social security number check are tools an employer may use, not the required form.

    IRS Pub. 15 (2026), p. 7 Reference document, not law.

70. A California Division of Occupational Safety and Health (Cal/OSHA) permit is needed for a trench a person must enter once it is how many feet deep?

    • A 4 Four feet is not the figure the section uses; the permit activity is 'trenches or excavations 5 feet or deeper'.
    • B 5 Correct
    • C 6 Six feet is not a permit trigger anywhere in the section, and a six foot trench is already caught by the five foot rule.
    • D 20 Twenty feet is not the permit depth; a trench needs the permit long before it reaches that figure.

    Five feet, because a permit is needed to build a trench or excavation 5 feet or deeper that a person must enter (8 CCR s. 341(d)(5)(A)). Four feet is not the permit depth.

    8 CCR s. 341(d)(5)(A)

71. A B General Building licensee with no asbestos certification is asked to strip 400 square feet of asbestos insulation. What is required?

    • A The C-22 classification alone The subdivision gives two routes joined by 'or', so the qualifier passing an asbestos certification examination is an alternative to holding the C-22 classification.
    • B Nothing below 500 square feet The threshold in the subdivision is '100 square feet or more of surface area of asbestos containing materials', which this 400 square foot job exceeds.
    • C The C-22 or a certified qualifier Correct
    • D Nothing beyond the B General license The bar applies to a contractor generally; s. 7058.6(c) lets an uncertified contractor bid and contract for such a project only where the asbestos work itself is performed by a C-22 holder or a certified and registered contractor.

    The C-22 or a certified qualifier: asbestos work on 100 square feet or more needs the C-22 classification, or a qualifier who passed the asbestos certification examination (Bus. & Prof. Code s. 7058.5(a)). The B license alone does not cover 400 square feet.

    Bus. & Prof. Code s. 7058.5(a)

72. Unless a raised location is otherwise protected, railings are required along its open sides once it stands how many feet above the level below?

    • A 4 The subsection states 7 1/2 feet; 4 feet is an excavation figure, appearing for example in the atmosphere testing rule in s. 1541(g)(1)(A).
    • B 6 The subsection states 7 1/2 feet; 6 feet appears in s. 1541(l)(1) for walkways over excavations, not in the railing trigger.
    • C 7 1/2 Correct
    • D 10 No 10 foot trigger appears in the section; the figure is 7 1/2 feet above the level underneath.

    7 1/2, because railings must go along the open sides of raised surfaces, platforms and other locations 7 1/2 feet or more above the level underneath, unless otherwise protected (8 CCR s. 1621(a)). Six feet is not the railing trigger.

    8 CCR s. 1621(a)

73. What can a contractor owed $4,000 on a home improvement job not get in small claims court?

    • A Foreclosure of its mechanics lien Correct
    • B A money judgment for the $4,000 Small claims court can give a money judgment on a claim this size; only the lien foreclosure has to go elsewhere.
    • C A fast, low-cost hearing Small claims courts are fast and economical, with a hearing usually within one to two months.
    • D A judgment as binding as superior court's Small claims judgments are as valid and binding as those of courts of greater jurisdiction.

    Foreclosure of its mechanics lien, because small claims court cannot foreclose one, though it can give a money judgment on a claim this size (CSLB Law Book 2026, p. 71). A money judgment for the $4,000 stays in small claims.

    CSLB Law Book 2026, p. 71

74. A framer cuts his hand Monday and gets stitches, and his employer first learns of it Wednesday. The injury report is due:

    • A Five days after Wednesday Correct
    • B Five days after Monday The five days run from when the employer obtains knowledge of the injury, not from the date the injury happened.
    • C Immediately by telephone The immediate report belongs to a serious injury or illness or a death under subdivision (b). A cut treated with stitches falls under the five day rule instead.
    • D Thirty days after Monday No 30 day period appears in the section; the routine report is due within five days after the employer obtains knowledge.

    Five days after Wednesday, because the report is due within five days after the employer obtains knowledge of the injury (Lab. Code s. 6409.1(a)). Counting from Monday, the day of the cut, starts the clock too early.

    Lab. Code s. 6409.1(a)

75. On the completed contract method, when is the income from a long-term job started in one tax year and finished the next reported?

    • A As each payment arrives Reporting income as payments arrive is the cash basis, and the completed contract method is a modification of the accrual basis instead.
    • B In the completion year Correct
    • C Across both years, by progress Spreading revenue and profit over the years the work is done is the percentage of completion method, the other of the two modifications named on the same page.
    • D In the year work began The source ties reporting to the year the contract is completed, not to the year it was signed or started.

    The completed contract method reports the income and the costs of a contract only in the year the contract is completed. Spreading them across the years the work is done is the percentage of completion method.

    CSLB Law Book 2026, p. 51

76. An active licensee with employees must keep a current workers' compensation certificate on file with the board:

    • A At issuance alone The section applies to reinstatement, reactivation, renewal and continued maintenance as well as issuance.
    • B At issuance and renewal Reinstatement and reactivation are named in the same list as issuance and renewal, so they carry the same condition.
    • C At all times Correct
    • D Not until its first renewal Issuance and reactivation are the first items on the same list, so the condition is not limited to renewal and maintenance.

    At all times: the certificate must be on file at all times, as a condition of issuing, renewing and keeping the license (Bus. & Prof. Code s. 7125(a)). Filing it only at issuance and renewal leaves the license uncovered in between.

    Bus. & Prof. Code s. 7125(a)

77. On the cash basis of accounting, revenue is recognized and expenses are deducted:

    • A When money is received and paid Correct
    • B When earned and when incurred That is the accrual basis on the next page, which 'recognizes revenues when earned and expenses when incurred, regardless of when payment is received or made'.
    • C When bills are sent and received Neither basis turns on billing. Under the cash basis the trigger is money received and paid, not the date a bill was sent or arrived.
    • D When the job is completed Reporting a job's income and costs in the year the contract finishes is the completed contract method, a modification of the accrual basis and not the cash basis.

    When money is received and paid, because the cash basis counts revenue when cash comes in and an expense in the year it is paid (CSLB Law Book 2026, p. 50). Counting income when earned and costs when incurred is the accrual basis.

    CSLB Law Book 2026, p. 50

78. What does the registrar look at to fix the amount of a disciplinary contractor's bond after a license law violation?

    • A A flat sum set by statute No single sum is fixed; the statute gives a $25,000 floor and a ceiling of 10 times the contractor's bond, and the registrar sets the amount between them.
    • B The consumer's loss The consumer's loss does not set the sum; the registrar fixes it by how serious the violation was, between $25,000 and 10 times the contractor's bond.
    • C The licensee's yearly volume Business volume plays no part; the sum turns on how serious the violation was.
    • D How bad the violation was Correct

    The seriousness of the violation sets it: the registrar fixes the sum at no less than $25,000 and no more than 10 times the contractor's bond (Bus. & Prof. Code s. 7071.8(b)). No flat statutory sum applies, and the licensee's volume of work plays no part.

    Bus. & Prof. Code s. 7071.8(b)

79. When a claim is made against a business run as a sole ownership, the owner faces:

    • A Personal liability for the claim Correct
    • B Liability limited to business assets Nothing in the sole ownership passage shields the owner: the owner is personally liable for any claims against the business, so the claim is not confined to business assets.
    • C Liability capped at the initial investment A cap at the amount invested is the limited partner's position, not the sole owner's; the sole owner has sole responsibility and complete control.
    • D No liability once the business closes The passage attaches personal liability to the owner and says nothing that ends it when the business stops trading.

    The owner is personally liable for any claim against the business, because sole ownership puts nothing between the owner and the business (CSLB Law Book 2026, p. 39). A cap at the amount invested describes a limited partner, not a sole owner.

    CSLB Law Book 2026, p. 39

80. A contractor funds a six-month remodel itself and bills the customer only at completion. Invoicing regularly instead would give it:

    • A Lower cash demands and better communication Correct
    • B A higher total contract price How often a contractor bills does not change what is owed. The same money is due either way; the question is when the contractor asks for it.
    • C No further need to report progress This reverses the source, which pairs regular invoicing with keeping the customer informed and tells the contractor to face a problem head-on before it becomes insurmountable.
    • D Payment guaranteed within thirty days Nothing in the source attaches a payment period to an invoice. It sets out settlement, small claims and arbitration as what a contractor does when it is not paid.

    Lower cash demands and better communication, because invoicing regularly minimizes the business's cash demands while keeping the customer informed (CSLB Law Book 2026, p. 71). Billing more often does not raise the contract price.

    CSLB Law Book 2026, p. 71

81. A debt on a construction company's balance sheet is a current liability when it:

    • A Is due within one year Correct
    • B Is due beyond one year That is the long-term category: 'Long-term liabilities are notes or mortgages due one year beyond the balance sheet date.'
    • C Is secured by company equipment Collateral does not decide the category. The source's long-term example is a bank loan 'secured by using certain equipment as collateral', and its due date is what makes it long term.
    • D Is owed to a supplier Who is owed does not decide it. Accounts payable to suppliers and notes payable on a promissory note are both current when due within the year.

    Is due within one year, because current liabilities are the company's debts due within one year of the balance sheet date (CSLB Law Book 2026, p. 55). Being owed to a supplier does not decide it; the due date does.

    CSLB Law Book 2026, p. 55

82. What does a balance sheet report about the financial position of a construction business?

    • A Its condition at one point in time Correct
    • B Its profit or loss across a period That is the income statement, which 'summarizes the operations of the company over a period of time' and shows revenue, expenses and the resulting profit or loss.
    • C Its cash receipts during the period A record of cash received across a period is again a period record, while the balance sheet is fixed at one date.
    • D Its estimated costs on current jobs Job cost estimates belong to bidding and estimation. The balance sheet lists assets, liabilities and equity.

    The balance sheet is a statement of the financial condition of a business at a certain point in time, which is why it is often called a snapshot; the statement that summarizes what happened across a period is the income statement.

    CSLB Law Book 2026, p. 51

83. In month three of an eighteen-month project, a subcontractor's phase is inspected and accepted. Its retention is released:

    • A After full project acceptance Correct
    • B After its phase's acceptance Earned and released are different things. The source says of retention 'You have already earned this amount even though you have not yet been paid', and separately that the total project must be accepted first.
    • C In installments as work proceeds Retention is withheld from progress payments and held pending completion and final acceptance; nothing releases it by installments while the project runs.
    • D After paying its suppliers Release turns on acceptance of the total project. The source notes retention may be held up 'through no fault of the contractor', which is the opposite of something the subcontractor can trigger.

    After full project acceptance: the total project must be accepted before retentions are released (CSLB Law Book 2026, p. 62). Acceptance of the subcontractor's own phase does not release its retention.

    CSLB Law Book 2026, p. 62

84. Current assets are $480,000, including $180,000 of inventories and $80,000 of retention, and current liabilities are $250,000. The quick ratio is:

    • A 0.83 to 1 0.83 is $250,000 divided by $300,000, the quick ratio taken the other way up. Quick assets go over current liabilities.
    • B 1.20 to 1 Correct
    • C 1.60 to 1 1.60 strips the $80,000 of retention instead of the inventories. The method is 'total current assets minus inventories', and retention is a current asset already earned.
    • D 1.92 to 1 1.92 is $480,000 over $250,000, which is the current ratio. The quick ratio substitutes quick assets for current assets.

    Quick assets are total current assets minus inventories, so $480,000 less $180,000 leaves $300,000, and dividing that by $250,000 of current liabilities gives 1.20. Retention stays in quick assets because only inventories come out.

    CSLB Law Book 2026, p. 60

85. A direct contractor awarded a public works contract must give an approved payment bond before starting work when the expenditure exceeds what amount?

    • A $1,000 $1,000 is the prevailing wage project threshold in Labor Code s. 1771, not the bond threshold; s. 9550 names twenty-five thousand dollars.
    • B $15,000 $15,000 is the maintenance and repair figure used elsewhere in the Labor Code; s. 9550 states an expenditure in excess of $25,000.
    • C $25,000 Correct
    • D $100,000 $100,000 appears nowhere in s. 9550, which fixes the trigger at an expenditure in excess of $25,000.

    $25,000: a direct contractor awarded a public works contract above that amount gives an approved payment bond before work starts (Civ. Code s. 9550(a)). A $15,000 contract is under that line and needs no payment bond under this rule.

    Civ. Code s. 9550(a)

86. What is the highest priority of the Contractors State License Board in its licensing and disciplinary work?

    • A Protection of the public Correct
    • B Fairness to the licensee Fair process is owed to a licensee, but the statute makes public protection paramount whenever the two pull apart.
    • C Growth of the contracting industry The statute names no industry growth objective, and it subordinates other interests to public protection.
    • D Efficient use of board funds Efficient administration is not the priority the statute states, and it must yield where public protection is at stake.

    Protecting the public comes first in the board's licensing, regulatory and disciplinary work, and it wins whenever another interest conflicts with it (Bus. & Prof. Code s. 7000.6). Fair treatment of licensees matters, but it gives way when the two pull apart.

    Bus. & Prof. Code s. 7000.6

87. Working capital, taken from the current sections of a contractor's balance sheet, is calculated as:

    • A Current assets minus current liabilities Correct
    • B Current assets over current liabilities Dividing is the current ratio: 'To calculate the current ratio, divide total current assets by total current liabilities.' Working capital is a subtraction.
    • C Current assets minus inventories Current assets less inventories is the source's simple method of determining quick assets for the quick ratio, not working capital.
    • D Total assets minus total liabilities Total assets less total liabilities is net worth or equity, the section representing the owners' claim on the assets of the business.

    Current assets minus current liabilities: the difference between those two totals is working capital (CSLB Law Book 2026, p. 60). Dividing one by the other gives the current ratio instead.

    CSLB Law Book 2026, p. 60

88. Which of these costs is overhead rather than a cost of the job being bid?

    • A Advertising and bad debts Correct
    • B Permits and other job fees The source lists permits and other fees among the 'Other direct costs that must be examined', not among overhead.
    • C Fuel and lubricants for equipment The source treats these as indirect job costs: 'Fuel and lubricant expenses, general maintenance, and small tools represent indirect costs that may be charged to the project'.
    • D Interest and loan commitment fees Interest, loan commitment fees, points and other charges on borrowed funds are listed with the other direct costs of the job, alongside equipment and job-specific insurance.

    Advertising and bad debts, because overhead includes office rental, supplies and wages, advertising, bad debts, storage charges and other general administrative costs (CSLB Law Book 2026, p. 64). Permits and other job fees are direct costs of the job.

    CSLB Law Book 2026, p. 64

89. Which cost of operations item is usually the largest single expense on a contractor's income statement?

    • A Direct labor payroll for all jobs Direct labor is the payroll cost for all jobs worked in the period and is called an important variable, but materials is the account named 'the largest single expense item'.
    • B Direct labor burden and benefits Direct labor burden is the payroll taxes, insurance and benefits attached to the labor payroll, a subset of labor cost rather than the largest line.
    • C General and administrative expenses General and administrative expenses are the items of a general nature that cannot be attributed to individual projects, and they are not the largest single expense.
    • D Materials used on the job Correct

    Materials used on the job, because that account is usually the largest single expense item on the income statement (CSLB Law Book 2026, p. 58). Direct labor is an important cost, but it is not the one named the largest.

    CSLB Law Book 2026, p. 58

90. A shop purchase has a $255,000 loan, a $45,000 down payment, $8,400 of closing costs and a $5,000 deposit already paid. What cash is due at closing?

    • A $48,400 Correct
    • B $53,400 This never takes off the $5,000 deposit, which was already paid and comes off the cash due at closing.
    • C $58,400 This adds the $5,000 deposit instead of taking it off; a deposit already paid reduces the cash due at closing.
    • D $303,400 This adds the $255,000 loan, but the lender pays that part of the price; the buyer brings the down payment and closing costs, less the deposit.

    The cash due at closing is $48,400, because it is the down payment plus the closing costs, less the deposit already paid: $45,000 plus $8,400, less $5,000. The loan is not cash the buyer brings, and adding it in overstates the amount.

    CFPB Your Home Loan Toolkit, p. 21 Reference document, not law.

91. How long do the parties have to return the board's agreement to arbitrate after the registrar mails it?

    • A 10 calendar days Ten calendar days is a third of the time allowed; the agreement is due back within 30 calendar days of mailing.
    • B 15 working days The statute counts calendar days, and it allows 30 of them, not 15 working days.
    • C 30 calendar days Correct
    • D 30 working days The 30 days are calendar days counted from mailing, so counting working days would stretch the deadline.

    30 calendar days: the agreement to arbitrate must be returned to the registrar within 30 calendar days of the date the registrar mails it (Bus. & Prof. Code s. 7085.3). Thirty working days would run past that deadline.

    Bus. & Prof. Code s. 7085.3

92. The body awarding a public works contract obtains the prevailing wage rate for each craft from whom?

    • A The Labor Commissioner The Labor Commissioner enforces the prevailing wage duty; the section names the Director of Industrial Relations as the source of the rate.
    • B The Director of Industrial Relations Correct
    • C The Division of Apprenticeship Standards The Division of Apprenticeship Standards administers apprenticeship; s. 1773 names the Director of Industrial Relations as the source of the rate.
    • D The Industrial Welfare Commission The Industrial Welfare Commission issues wage orders; the rate comes from the Director of Industrial Relations under s. 1773.

    The awarding body must obtain the rate for each craft from the Director of Industrial Relations, for the locality where the work is to be done (Lab. Code s. 1773). The Labor Commissioner enforces the wage duty and is not the source of the rate.

    Lab. Code s. 1773

93. Prevailing wages need not be paid on a public works project whose total cost is no more than:

    • A $1,000 Correct
    • B $15,000 $15,000 is the maintenance figure in the registration exemption in s. 1725.5(f) and in the labor compliance program election in s. 1771.5(a); it does not appear in s. 1771.
    • C $25,000 $25,000 is the construction figure in the same registration exemption in s. 1725.5(f), not the prevailing wage threshold.
    • D $30,000 $30,000 is the apprenticeship threshold in s. 1777.5(o), which governs apprentice ratios and not the wage duty.

    $1,000: prevailing wages are owed on every public works project except one of $1,000 or less (Lab. Code s. 1771). A $15,000 or $25,000 project is past that line and owes them.

    Lab. Code s. 1771

94. Whose bodily injury does commercial general liability insurance protect a contractor against liability for?

    • A The contractor's own employees Employee injury is carved out of the description, which reaches the public other than employees.
    • B Employees and the public alike The cover is written for the public with employees excepted, so it does not run to both groups.
    • C The public, excluding the contractor's employees Correct
    • D Only the property owner and their family The description reaches members of the public generally, not only the owner and household.

    The public, excluding the contractor's employees: the cover protects the contractor from liability to members of the public other than employees (CSLB Law Book 2026, p. 43). Injury to the contractor's own employees is outside it.

    CSLB Law Book 2026, p. 43

95. Besides a valid contractor license, a contractor may bid on or perform public work only with:

    • A Current Department of Industrial Relations registration Correct
    • B An approved labor compliance program A labor compliance program under s. 1771.5 is elected by the awarding body, not held by a contractor, and it qualifies nobody to bid.
    • C A wage determination in its name Under s. 1773 the Director of Industrial Relations determines the rates and the awarding body obtains them; no determination issues in a contractor's name.
    • D A Labor Commissioner exemption certificate The Labor Commissioner issues no certificate of exemption from registration; the only relief is the project size exemption in s. 1725.5(f).

    Current Department of Industrial Relations registration, because a contractor must be currently registered to bid, be listed in a bid or perform public work (Lab. Code s. 1771.1(a)). A labor compliance program belongs to the awarding body, not the contractor.

    Lab. Code s. 1771.1(a)

96. If a canvasser signs homeowners to kitchen contracts at their doors for a remodeling contractor, what must the canvasser hold?

    • A A home improvement salesperson registration Correct
    • B His own contractor license The canvasser sells for a licensed contractor rather than contracting himself, and the statute asks a salesperson registration of that role.
    • C Nothing while he works for a licensee The registration applies to salespeople who work on behalf of a licensed contractor, so working for a licensee is no exemption.
    • D A city business license A city business license does not replace the registration with the board that the statute requires of a home improvement salesperson.

    A home improvement salesperson registration. A person who solicits or sells home improvement contracts on behalf of a licensed contractor must register with the board to act as a home improvement salesperson (Bus. & Prof. Code s. 7152(a) and (b)). Working for a licensee does not excuse him, since the registration covers people who sell on a licensee's behalf.

    Bus. & Prof. Code s. 7152(a) and (b)

97. On a routine $1,200,000 city street paving contract, the most retention the city may withhold in total is:

    • A $6,000 This is half of one percent of the price, a slipped decimal point and not the 5 percent ceiling.
    • B $30,000 A city may hold less than the cap, but this is half of the 5 percent ceiling and the question asks for the most it may hold.
    • C $60,000 Correct
    • D $120,000 This is 10 percent of the price, double the ceiling; total retention may not exceed 5 percent of the contract price.

    The city may withhold no more than $60,000 in total, because Public Contract Code section 7201(b)(1) caps total retention on a public works contract at 5 percent of the contract price, and 5 percent of $1,200,000 is $60,000. A higher figure needs a finding before the bid that the project is substantially complex, which a routine paving job does not have.

    Pub. Contract Code s. 7201(b)(1)

98. If a contractor's net worth is $420,000, its sales $2,100,000 and its net income to net worth 15 percent, what is its net income?

    • A $63,000 Correct
    • B $315,000 This takes the ratio of sales, but the ratio compares net income with net worth, so sales are not its base.
    • C $483,000 This adds the net income to the net worth, but the question asks only for the net income the ratio gives.
    • D $2,800,000 This divides net worth by the ratio instead of taking the ratio's share of net worth.

    $63,000: net income to net worth sets net income against the owners' net worth, and 15 percent of $420,000 is $63,000 (CSLB Law Book 2026, pp. 56 and 61). The $2,100,000 in sales plays no part in this ratio.

    CSLB Law Book 2026, pp. 56 and 61

99. Where no first-year write-off is claimed, the cost of business equipment expected to last more than one year is deducted:

    • A In full in the year bought Deducting the whole cost in the year bought takes a first-year write-off, and the stem says none is claimed.
    • B In the year it is sold Depreciation deducts part of the cost each year the equipment is in use, starting before any sale.
    • C When the purchase loan is paid off How the equipment was financed does not decide when its cost is deducted; the cost is spread over the tax years of its use.
    • D In parts over several years Correct

    In parts over several years: equipment expected to last more than one year generally cannot be deducted in full in the year bought, and its cost is spread over more than one tax year (IRS Pub. 334 (2025), p. 36). Deducting it all at once takes a first-year write-off, which the stem rules out.

    IRS Pub. 334 (2025), p. 36 Reference document, not law.

100. If no notice of completion or cessation is ever recorded, how many days after the job is completed does a subcontractor have to record its lien?

     • A 45 Forty-five days is an owner's time to release retention on a private job, not a claimant's lien deadline.
     • B 60 Sixty days is a direct contractor's limit after a recorded notice; a subcontractor with no notice recorded has 90 days.
     • C 90 Correct
     • D 120 No 120-day window appears in the rule; the outside limit is 90 days after completion.

     90 days: a claimant other than a direct contractor must record its lien before the earlier of 90 days after completion or 30 days after a recorded notice, and with no notice recorded only the 90-day limit applies (Civ. Code s. 8414(b)(1)). No 120-day window appears in the rule.

     Civ. Code s. 8414(b)(1)

101. If a contractor buys an office building for its business this year, over how many years is it depreciated under the Modified Accelerated Cost Recovery System?

     • A 7 Seven years is far shorter than any recovery period for a building; nonresidential real property takes 39 years.
     • B 15 Fifteen years is the class for improvements to land such as fences, roads and sidewalks, not for a building.
     • C 27.5 A recovery period of 27.5 years is for residential rental property, and an office building is nonresidential real property.
     • D 39 Correct

     An office building is nonresidential real property, which is depreciated over 39 years under the Modified Accelerated Cost Recovery System (MACRS). The shorter 31.5-year period applies only where business use began before May 13, 1993, which cannot be true of a building bought this year.

     IRS Pub. 946 (2025), pp. 30 and 33 Reference document, not law.

102. A licensee with no employees files the certifying statement. Which classification on its license still bars it from the workers' compensation exemption?

     • A C-10 Electrical C-10 Electrical is not among the C-8, C-20, C-22, C-39 or D-49 classifications, so a licensee with no employees may take the exemption.
     • B C-36 Plumbing C-36 Plumbing is not on the list of classifications that keep the certificate duty, so the exemption stays open.
     • C C-39 Roofing Correct
     • D C-33 Painting C-33 Painting is not among the listed classifications, so a painting licensee with no employees may file for the exemption.

     C-39 Roofing: until January 1, 2028, when this version of the section is repealed (Bus. & Prof. Code s. 7125(i)), a licensee with no employees is exempt only if it also holds none of the C-8, C-20, C-22, C-39 or D-49 classifications (s. 7125(b)); from then only a joint venture with no employees is exempt. An electrical, plumbing or painting licensee with no employees can still file for the exemption until then.

     Bus. & Prof. Code s. 7125(b) and (i)

103. What does a performance bond on a construction job guarantee the property owner?

     • A Completion to plans and specifications Correct
     • B Payment of all labor and materials Payment of labor and material bills is what a payment bond secures, not a performance bond.
     • C Both completion and payment A bond guaranteeing both completion and payment is a contract bond.
     • D Cover for every job the contractor takes Covering any project the contractor agrees to perform describes the contractor license bond, not a project bond.

     Completion to plans and specifications, because performance bonds guarantee the project's completion according to the building plans and specifications (CSLB Law Book 2026, p. 42). Payment for labor and materials is the payment bond's job, and a bond covering both is a contract bond.

     CSLB Law Book 2026, p. 42

104. If a $1,500,000 contract with $160,000 total estimated profit is 35 percent complete at year end, how much profit is earned under the percentage of completion method?

     • A $0 Reporting nothing until the contract is finished is the completed contract method; the percentage of completion method reports profit as work is done.
     • B $56,000 Correct
     • C $160,000 This counts all of the estimated profit, though only the share matching the work performed is considered earned.
     • D $525,000 This takes the completed share of the contract price, which is revenue earned, not profit earned.

     $56,000: under the percentage of completion method the share of the work performed is the share of total estimated profit earned, and 35 percent of $160,000 is $56,000 (CSLB Law Book 2026, p. 51). The $1,500,000 contract price is not the base for the profit figure.

     CSLB Law Book 2026, p. 51

105. Midway through a kitchen remodel the homeowner asks for work outside the written scope. What should the contractor do about cost and time?

     • A Negotiate them right away Correct
     • B Document now, price later Writing the request down is only the first half; the passage adds that the effect of the change on cost and time is negotiated immediately, not left until later.
     • C Absorb it for goodwill Absorbing an extra leaves the change undocumented and unpriced, which is the practice the Law Book identifies as a source of disputes.
     • D Settle at the walk-through The walk-through near the end of the job is for listing items left to complete, not for pricing a change agreed months earlier.

     Negotiate them right away: once a request differs from what was agreed, the contractor must document it in writing and negotiate its effect on cost and time immediately (CSLB Law Book 2026, p. 70). Writing it down and pricing it later skips the second step.

     Bus. & Prof. Code ss. 7159(c)(5) and 7159.6(a); CSLB Law Book 2026, p. 70

106. If a contractor's only worker is his adult daughter, paid by the hour, what does workers' compensation require for her?

     • A None; family is exempt There is no family exemption for an employed relative. The employer's liability reaches relatives on the same basis as other employees.
     • B Coverage after 30 days Nothing delays coverage for a set number of days; the liability applies to an employed relative from the start.
     • C Coverage if full time Hours worked do not decide it. An employer with even one part-time employee must insure for workers' compensation.
     • D Coverage like any employee Correct

     She must be covered like any other employee, because an employer's workers' compensation liability extends to employed relatives on the same basis as any other employee (CSLB Law Book 2026, p. 44). No family exemption, waiting period or full-time test applies to a relative on the payroll.

     CSLB Law Book 2026, p. 44

107. What must a contractor do first after its crew uncovers human remains during an excavation?

     • A Stop work and call the local police The first call goes to the county coroner; the police are not named in the required steps.
     • B Stop work and notify the building inspector The required steps name the county coroner, and a building inspector plays no part in them.
     • C Stop work and call the county coroner Correct
     • D Call the Native American Heritage Commission The coroner, not the contractor, notifies the Native American Heritage Commission, and only if the remains are Native American.

     Work stops at once at the site and any nearby area that may hold remains, and the contractor contacts the county coroner, because that is the first required step when remains turn up outside a dedicated cemetery (CSLB Law Book 2026, p. 88). The coroner, not the contractor, notifies the Native American Heritage Commission, and only once the remains prove to be Native American.

     CSLB Law Book 2026, p. 88

108. Before soliciting, selling, negotiating, or executing a contract, what must a registered home improvement salesperson tell the owner or tenant?

     • A The contractor's name and license number Correct
     • B The contractor's license classification The duty names the contractor's business name and license number, not the license classification.
     • C Every contractor the salesperson represents The disclosure attaches to the transaction at hand, so the buyer is told the contractor being represented for that transaction, not every contractor the salesperson works for.
     • D The contractor's bond and insurance numbers Bond and insurance details are not part of the salesperson's identification duty, which names the business name and license number.

     The salesperson must first tell the owner or tenant the business name and license number of the contractor being represented in that transaction (Bus. & Prof. Code s. 7152(c)). A list of every contractor the salesperson works for is not required, because the duty names only the one represented in that transaction.

     Bus. & Prof. Code s. 7152(c)

109. One of the four types of contractual agreement between a builder and an owner is:

     • A The guaranteed-maximum cost contract Correct
     • B The joint control agreement A joint control arrangement handles disbursement of funds and is not one of the four builder and owner contract types named.
     • C The notice to proceed A notice to proceed tells the builder to start work under a contract already made; it is not one of the four contract types the passage lists.
     • D The letter of intent A letter of intent is a preliminary document, not one of the four named agreements between builder and owner.

     The guaranteed-maximum cost contract, because it is one of the four builder and owner agreements, with the lump-sum, the cost-plus and the unit-price contract (CSLB Law Book 2026, p. 69). A joint control agreement handles disbursement of funds and is not one of the four.

     CSLB Law Book 2026, p. 69

110. Thermal system insulation and surfacing material in buildings constructed no later than which year are presumed to contain asbestos?

     • A 1970 The presumption runs through buildings constructed no later than 1980, not 1970.
     • B 1972 The cutoff in the asbestos standard's definition is 1980, not 1972.
     • C 1980 Correct
     • D 1985 A building constructed in 1985 is after the 1980 cutoff.

     The year is 1980, because thermal system insulation and surfacing material found in buildings constructed no later than 1980 is defined as presumed asbestos-containing material (8 CCR s. 1529(b)). A building finished in 1985 falls outside the presumption, and a 1970 or 1972 cutoff would leave later buildings out of it.

     8 CCR s. 1529(b)

111. The downpayment on a home improvement contract, where one is charged, may be no more than:

     • A $1,000 or 10 percent, whichever is less Correct
     • B $1,000 or 10 percent, whichever is greater Reading the test as whichever is greater would allow $3,000 on a $30,000 contract, which is three times what the statute permits.
     • C $2,500 or 20 percent, whichever is less Neither figure appears in the downpayment rule, which fixes $1,000 and 10 percent.
     • D 10 percent, with no dollar ceiling Dropping the dollar ceiling would let a large contract carry a downpayment far above $1,000, and the statute caps it at $1,000.

     $1,000 or 10 percent of the contract amount, whichever is less, caps a home improvement downpayment (Bus. & Prof. Code s. 7159.5(a)(3)). Whichever is greater would let a large job carry far more than $1,000.

     Bus. & Prof. Code s. 7159.5(a)(3)

112. In an estimate, labor priced by work classification must include, besides the hourly wage rate:

     • A Payroll taxes, benefits and required insurance Correct
     • B Office rent and office staff wages Office rental, supplies and wages are listed as overhead expenses the contractor identifies separately, not as part of the labor cost by classification.
     • C Permits and loan commitment fees Permits, fees, interest and loan commitment charges are listed as other direct costs, a separate line from the labor build-up.
     • D Fuel, lubricants and small tools Fuel and lubricant expenses, general maintenance and small tools are named as indirect costs charged to the project, not as labor cost.

     Payroll taxes, benefits and required insurance: labor priced by classification carries payroll taxes, health and welfare benefits, vacation pay and required insurance on top of the hourly wage (CSLB Law Book 2026, p. 64). Office rent and office staff wages are overhead, not labor cost.

     CSLB Law Book 2026, p. 64

113. Besides how it handles labels, data sheets and training, a hazard communication program must include:

     • A Each chemical's air monitoring results Air monitoring results are exposure records, not part of the written program, which lists the chemicals present.
     • B A list of its chemical suppliers The program lists the hazardous chemicals by product identifier, not the suppliers.
     • C A list of hazardous chemicals present Correct
     • D A respirator fit test log A fit test log is not an element of the written hazard communication program.

     A list of hazardous chemicals present, because the program must include a list of the hazardous chemicals known to be present, by the product identifier on each safety data sheet (8 CCR s. 5194(e)(1)(A)). A list of chemical suppliers is not part of it.

     8 CCR s. 5194(e)(1)(A)

114. Which item must an extra work or change order set forth to be enforceable against a home improvement buyer?

     • A The salesperson's registration number The salesperson's name and registration number belong in the underlying contract, and the change order enforceability rule lists only three items, none of them this.
     • B A new legal description A legal description is part of the writing required for a new single-family dwelling contract, and it is not among the three items a change order must carry.
     • C Effect on payments or completion Correct
     • D The buyer's waiver of cancellation A waiver of cancellation rights appears nowhere in the change order rule, which lists the scope, the amount, and the effect on payments or completion.

     Effect on payments or completion: a change order binds the buyer only if it sets out the scope, the amount added or subtracted, and its effect on progress payments or the completion date (Bus. & Prof. Code s. 7159.6(a)). A new legal description is not one of those three items.

     Bus. & Prof. Code s. 7159.6(a)

115. A business becomes an employer for California unemployment insurance once it pays wages in a calendar quarter of more than:

     • A $50 $50 is half the $100 quarterly figure the definition uses.
     • B $100 Correct
     • C $250 $250 is well past the point where the duty starts. Wages over $100 in a quarter make a business an employer.
     • D $500 $500 is five times the $100 figure the definition uses.

     The trigger is $100, because an employing unit with one or more employees becomes an employer when it pays wages for employment in excess of $100 during any calendar quarter (Unemp. Ins. Code s. 675). Lower amounts such as $50 are not figures the definition uses.

     Unemp. Ins. Code s. 675

116. Besides its own employees, which workers must an employer's injury and illness prevention program cover?

     • A Those it directs and directly supervises Correct
     • B Every subcontractor's crew on the site Coverage reaches workers the employer controls or directs and directly supervises, not every other firm's crew.
     • C Visitors to the job site Visitors are not workers the employer directs and supervises on the job.
     • D The project owner's staff The owner's staff are not workers this employer directs and directly supervises.

     The program must also cover all other workers the employer controls or directs and directly supervises on the job, to the extent they face worksite and job-specific hazards (Lab. Code s. 6401.7(h)). A subcontractor that directs and supervises its own crew keeps its own duties for them.

     Lab. Code s. 6401.7(h)