Question

A property is sold on July 15. The prepaid annual insurance is 750 and the annual water bill of90 was prepaid on January 1. If these payments are prorated, what amount will be returned to the seller?

1) $350
2) $387
3) $403
4) $456

Answer 1

To calculate the prorated refund for both the annual insurance and the annual water bill, we figure out the amount per day and then multiply by the days left in the year after the sale. The total prorated refund to be returned to the seller for the prepaid insurance and water bills is $390.96.

Step-by-step explanation:

To determine the prorated amount to be returned to the seller for the prepaid annual insurance and the annual water bill, we need to calculate each separately and then add them together.

The annual insurance is $750, prepaid for the entire year. Since the property is sold on July 15, we have to find out how many days of coverage are left starting from July 15 to the end of the year. From July 15 to December 31, there are 169 days left. As a year has 365 days, the prorated insurance refund is calculated as follows:

($750 / 365 days) * 169 days = $349.32

Similarly, for the annual water bill of $90, which was also prepaid from January 1, we calculate the prorated amount from July 15 to December 31:

($90 / 365 days) * 169 days = $41.64

The total prorated amount to be returned to the seller is the sum of the prorated insurance refund and water bill refund:

$349.32 + $41.64 = $390.96

This amount is not exactly one of the provided options, indicating a possible miscalculation or misunderstanding in the original question, or the choices may not include the correct answer.