Alabama Business & Law Examination (formerly General Contractor Examination)

In arbitration a third-party arbitrator acts as a judge and renders an arbitral award that legally binds all parties, while in mediation an independent mediator only facilitates dialogue and the parties themselves set the terms of any agreement.

On the income statement, direct costs are tied to a particular project (materials, subcontractor fees, permit fees, labor), while operating/indirect expenses include items like office salaries, advertising, and warehouse rental.

Under the accrual method income is recognized when the services occur and expenses when they are incurred, not when money is collected or bills are paid; most construction businesses use the accrual method.

A bank letter of credit is not a bond but a cash guarantee to the owner (convertible to a payment, not a guarantee of performance) and customarily covers only 5 to 10 percent of the contract rather than the full amount.

Maintenance bonds often use 10 percent of construction cost as the required bond amount, while performance bonds are usually set at 100 percent of the contracted price.

A new prime contractor application requires a $300 cashier's/certified check or money order and renews for $200, while a subcontractor application requires $150 and renews for $100.

Prime contractors are assigned maximum bid limits by classification (e.g., Classification A up to $100,000; Classification D up to $1,000,000), but subcontractors are not subject to bid limits.

Prime contractors must file within six months after the last work or labor was furnished, while laborers and journeymen must file within 30 days after the work or labor was furnished.

When payment terms are not agreed to, the owner must pay the contractor within 30 days after receipt of a pay request or invoice, while the contractor must pay subcontractors within 7 days after receiving payment from the owner.

Leasing offers no down payment, lower payments spread over a longer period, lease payments deductible as operating expenses, and return of obsolete equipment; purchasing usually costs less in the long run and provides ownership/salvage value, while leases generally cannot be cancelled.

They are mutually exclusive remedies — an owner who sues for liquidated damages (e.g., $500/day × days late) cannot also sue for actual damages.

MACRS is the IRS-approved accelerated method giving larger deductions in the earlier years of an asset's useful life, while straight-line spreads (cost minus salvage) evenly over the useful life.

Form 941 is the quarterly employer's return for withheld income, Social Security, and Medicare taxes (tax may be paid with the return if quarterly liability is under $2,500), while FUTA is paid solely by the employer and reported on Form 940.