A lump sum project price is $160,000 with 10% retainage. The contractor has received progress payments for 75% of the project. The final payment amount should be for?

A lump sum project price is $160,000 with 10% retainage. The contractor has received progress payments for 75% of the project. The final payment amount should be for?

• A. More than $50,000
• B. About $40,000
• C. Less than $30,000
• D. Exactly $60,000

Answer: (A)

Retainage held from progress payments is released only when the project is complete, so the final payment includes both the remaining value of the work and the release of previously withheld retainage.

With a total contract price of 160,000, 75% completion means 120,000 of work value has been earned. Retainage at 10% on those progress payments equals 12,000, so the contractor has effectively received 108,000 to date (120,000 minus 12,000).

The remaining value of the contract is 40,000 (160,000 minus 120,000). At final completion, the retained 12,000 is released, so the final payment would be 40,000 plus 12,000 = 52,000. That amount is more than 50,000.