Calculate the mechanics lien amount a subcontractor can claim for $35,000 in unpaid work, including allowable interest at 8% annual rate over 6 months.
Correct Answer
B) $36,400
Lien amount = $35,000 + ($35,000 × 0.08 × 0.5) = $35,000 + $1,400 = $36,400
Why This Is the Correct Answer
$36,400 is correct. The calculation is: Interest = Principal × Rate × Time = $35,000 × 0.08 × 0.5 (6 months = 0.5 years) = $35,000 × 0.04 = $1,400. Total lien amount = $35,000 + $1,400 = $36,400. This uses simple interest, which is the standard for lien calculations.
Why the Other Options Are Wrong
Option A: $37,100
$37,100 does not match any standard calculation. It may result from using an incorrect rate (e.g., 6% annual × 1 year = $2,100 added) or misreading the time period. Always confirm you are applying the stated rate and time period precisely.
Option C: $37,800
$37,800 results from applying 8% for a full year ($35,000 × 0.08 = $2,800) rather than 6 months. This is the most common error — forgetting to convert 6 months to 0.5 years when using an annual interest rate.
Option D: $36,750
$36,750 does not result from any standard simple-interest formula applied to the given figures. It may stem from misremembering a prior calculation or applying a different rate (e.g., 5% for 1.5 years).
Memory Technique
For lien interest problems, use the simple interest formula: I = P × R × T. Write it out every time: P = $35,000, R = 0.08, T = 0.5. Then I = $1,400 and total = $36,400. Never skip the T conversion.
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