A project requires submission of Pay Application #3 for work completed through February. The contract amount is $500,000, with 10% retainage. Previous payments total $180,000. Work completed to date is $275,000. What is the amount due?
Correct Answer
C) $67,500
Work completed ($275,000) less 10% retainage ($27,500) equals $247,500. Subtract previous payments ($180,000) to get current payment due: $247,500 - $180,000 = $67,500.
Why This Is the Correct Answer
The correct calculation follows the standard pay application formula used in construction contracts. First, calculate the net amount earned to date by taking the work completed ($275,000) and subtracting the 10% retainage ($27,500), which equals $247,500. Then subtract all previous payments received ($180,000) to determine the current payment due of $67,500. This ensures the contractor receives payment for new work while maintaining the required retainage percentage.
Why the Other Options Are Wrong
Option A: $95,000
This amount ($77,500) incorrectly calculates retainage only on the current period's work rather than on the total work completed to date, resulting in an overpayment that would reduce the overall retainage percentage below the required 10%.
Option B: $85,500
This amount ($85,500) appears to subtract retainage from only the new work performed this period ($95,000 - $9,500), rather than calculating retainage on the cumulative work completed, which violates standard retainage practices.
Memory Technique
Remember 'WRAP': Work completed, Retainage subtracted, All previous payments subtracted, Payment due calculated. Always apply retainage to the total cumulative work, not just the current period.
Reference Hint
Florida Building Code, Chapter 1, Section 107 - Fees and Permits, or AIA A201 General Conditions Article 9 - Payments and Completion
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