A contractor's surety bond is $25,000. If a claimant is awarded $18,000 and bond costs are $2,000, what amount remains available for future claims?
Correct Answer
D) $5,000
The remaining bond amount is $25,000 - $18,000 (claim) - $2,000 (costs) = $5,000 available for future claims.
Why This Is the Correct Answer
The remaining bond amount is calculated by subtracting all paid amounts from the original bond value: $25,000 (original bond) - $18,000 (claim payout) - $2,000 (bond costs) = $5,000. This is the amount still available to satisfy future claims against the bond.
Why the Other Options Are Wrong
Option A: $25,000
$25,000 is the original bond amount before any claims or costs are paid. Once a claim is paid and costs are incurred, those amounts reduce the available bond balance. Selecting $25,000 ignores the claim and cost deductions entirely.
Option B: $23,000
$23,000 results from subtracting only the $2,000 bond costs but ignoring the $18,000 claim payout ($25,000 - $2,000 = $23,000). This is a partial calculation error — both the claim and the costs must be deducted.
Option C: $7,000
$7,000 results from subtracting only the $18,000 claim but ignoring the $2,000 bond costs ($25,000 - $18,000 = $7,000). This is also a partial calculation — all deductions must be applied.
Memory Technique
Think of the bond as a bucket of water ($25K). The claim ($18K) and the costs ($2K) are cups of water removed from the bucket. What's left: 25 - 18 - 2 = 5. The bucket has $5K remaining.
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