A subcontractor submits a payment application for $85,000. The contract specifies 10% retention until project completion. What amount should be paid?
Correct Answer
A) $76,500
With 10% retention, the payment amount = $85,000 × (100% - 10%) = $85,000 × 0.90 = $76,500. The $8,500 retention will be held until project completion.
Why This Is the Correct Answer
Option A is correct because retention calculations require multiplying the payment application amount by the percentage that will be paid (not retained). With 10% retention, 90% is paid immediately. The calculation is $85,000 × 0.90 = $76,500. The remaining $8,500 (10%) is held as retention until project completion or final acceptance.
Why the Other Options Are Wrong
Option B: $85,000
This represents paying the full amount without any retention deduction, which violates the contract terms specifying 10% retention until completion.
Option C: $78,000
This amount doesn't correspond to any standard retention calculation and appears to be an arbitrary figure that doesn't follow the 10% retention requirement.
Option D: $80,000
This would represent approximately 6% retention ($5,000 held back), which doesn't match the contract specification of 10% retention.
Memory Technique
Remember 'R.P.M.' - Retention Percentage Minus (from 100%) = Payment percentage. Then multiply the application amount by the payment percentage.
Reference Hint
Florida Building Code Chapter 1, Section 107 - Fees and Permits, or contract administration sections in general contracting reference materials
More Business & Finance Questions
A contractor's license expires on March 31st. If they submit a renewal application on April 15th, what additional requirement must be met under Florida regulations?
A general contractor purchases equipment worth $45,000 with a useful life of 9 years and no salvage value. Using straight-line depreciation, what is the annual depreciation expense?
In Florida, what is the minimum workers' compensation insurance coverage required for construction companies with employees?
What is the typical recommended coverage amount for general liability insurance for a small to medium-sized general contracting business?
A contractor estimates startup costs of $75,000 for equipment, $25,000 for initial inventory, $15,000 for insurance premiums, and $10,000 for working capital. They can finance 70% of the total. How much cash do they need?
When establishing professional relationships with architects and engineers, what is the most important factor for a general contractor to consider?
A partnership agreement for a construction company should address all of the following EXCEPT:
A contractor purchases a truck for $60,000. After 5 years, it has accumulated depreciation of $35,000. What is the truck's book value?
A general contractor is working on a project where the structural engineer's calculations appear questionable. What is the most appropriate course of action?
Which business structure requires the most complex tax filing and regulatory compliance for a Florida contracting business?