A contract holds a $30,000 warranty reserve. After correction of accepted items, 80 percent of the reserve is released. What amount remains reserved?
Correct Answer
B) $6,000
Released reserve is $30,000 x 80% = $24,000, so remaining reserve is $30,000 - $24,000 = $6,000. Other choices use 40%, report released amount, or leave the full reserve.
Why This Is the Correct Answer
Released reserve is $30,000 x 80% = $24,000, so remaining reserve is $30,000 - $24,000 = $6,000. Other choices use 40%, report released amount, or leave the full reserve.
Why the Other Options Are Wrong
Option A: $12,000
warranty reserve release, choice b: $12,000 backs into 15,000 when divided by 80 percent; the accepted setup gives 7,500 on that same base.
Option C: $24,000
warranty reserve release, choice c: the number $24,000 comes from $30,000 x 80 percent.
Option D: $30,000
warranty reserve release, choice d: $30,000 equals $30,000. That copies a listed value without completing the operation.
Memory Technique
Picture a rough-in sticker labeled warranty reserve release: finish every operation before accepting $6,000.
Reference Hint
Open NASCLA Contractors Guide to Business, Law and Project Management, 14th Ed.; use the index entry or section for "Warranty reserve release" to confirm that Released reserve is $30,000 x 80% = $24,000, so remaining reserve is $30,000 - $24,000 = $6,000.
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