XYZ Contractors has current gross receipts of $8 million annually. They want to upgrade from Class B to Class A. What additional net worth must they demonstrate beyond the Class B requirement?
Correct Answer
B) $2,250,000
Class A requires $2,500,000 net worth while Class B requires $250,000, so the additional requirement is $2,250,000.
Why This Is the Correct Answer
Class A general engineering contractor requires a minimum net worth of $2,500,000 under B&P Code Section 7071.5, while Class B general building contractor requires $250,000. The additional net worth needed to upgrade from Class B to Class A is $2,500,000 minus $250,000, which equals $2,250,000.
Why the Other Options Are Wrong
Option A: $1,500,000
$1,500,000 is not the correct difference. This figure does not correspond to the statutory net worth thresholds for either Class A ($2,500,000) or Class B ($250,000). It may arise from miscalculating or confusing intermediate figures.
Option C: $2,000,000
$2,000,000 is close but incorrect. The correct difference is $2,250,000 ($2,500,000 - $250,000). Choosing $2,000,000 suggests an error in recalling either the Class A or Class B net worth figure.
Option D: $2,500,000
$2,500,000 is the total Class A requirement, not the additional amount beyond Class B. A contractor upgrading from Class B already meets the $250,000 threshold; they only need the incremental difference, which is $2,250,000.
Memory Technique
Class A = $2.5M. Class B = $0.25M. Difference = $2.25M. Think of it as: Class B is 10% of Class A, so the gap is 90% of $2.5M = $2.25M. The '2.25' is easy to remember because it is between 2 and 2.5.
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