A contractor receives a payment application that includes 10% retainage. If the total work completed is valued at $250,000, how much should be paid to the contractor?
Correct Answer
A) $225,000
With 10% retainage, the contractor receives 90% of the work completed value. Payment = $250,000 × 0.90 = $225,000. The remaining $25,000 is held as retainage.
Why This Is the Correct Answer
Retainage is a percentage of the contract value that is withheld by the owner to ensure project completion and quality. When 10% retainage is applied, the contractor receives 90% of the work completed value immediately. The calculation is straightforward: $250,000 × 0.90 = $225,000. The remaining $25,000 is held as retainage until project completion or substantial completion.
Why the Other Options Are Wrong
Option B: $240,000
This amount ($235,000) would represent only 6% retainage being withheld ($15,000), which is significantly less than the 10% retainage specified in the contract terms.
Option D: $230,000
This amount ($230,000) would represent only 8% retainage being withheld ($20,000), not the specified 10% retainage required in the problem.
Memory Technique
Think 'RETAIN-age' - the owner RETAINs a percentage, so the contractor gets 100% minus the retained percentage. Use the phrase '10% retained means 90% paid' to remember the inverse relationship.
Reference Hint
Florida Building Code - Chapter 1, Section 107 (Construction Documents and Permits) and Florida Statutes Chapter 713 (Construction Liens)
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