A pay application shows $925,000 completed to date. Retainage is 5 percent and previous payments total $710,000. What current payment is due?
Correct Answer
A) $168,750
Net earned is $925,000 x 95% = $878,750. Current payment is $878,750 - $710,000 = $168,750. Other choices omit retainage, report gross earned less previous payments, or report net earned to date.
Why This Is the Correct Answer
Net earned is $925,000 x 95% = $878,750. Current payment is $878,750 - $710,000 = $168,750. Other choices omit retainage, report gross earned less previous payments, or report net earned to date.
Why the Other Options Are Wrong
Option B: $46,250
pay application current due, choice b: $46,250 is produced by $925,000 x 5 percent. The error is using that partial/alternate setup.
Option C: $215,000
pay application current due, choice c: $925,000 - $710,000 gives $215,000. That calculation subtracts those two listed numbers in that order.
Option D: $878,750
pay application current due, choice d: $878,750 is an intermediate from the steps (Net earned is 925000 x 95% = 878750.); the calculation continues to $168,750.
Memory Technique
Picture a dimension string labeled pay application current due: finish every operation before accepting $168,750.
Reference Hint
Open NASCLA Contractors Guide to Business, Law and Project Management, 14th Ed.; use the index entry or section for "Progress payment calculation" to confirm that Net earned is $925,000 x 95% = $878,750.
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