Question

A property's real estate taxes are $1,000, and this amount is paid in arrears. The closing was on May 5th. How would the entry read on the closing statement? Assume the taxes remain the same, the seller owns the day of closing, and use the 360-day method.

Answer 1

Answer:

Credit the buyer $347.22, debit the seller $347.22

Explanation:

The journal entry is shown below:

Seller Dr $347.22

    To Buyer $347.22

(Being the entry is recorded)

The computation is shown below:

We assume the starting month is from January to May 5

So the total number of days calculated till May 5 is

= 31 days in January + 28 days in February + 31 days in March + 30 days in April + 5 days in May

= 125 days

Now the amount is

= $1,000 × 125 days ÷ 360 days

= $347.22