Question

The adjustment of prepaid items and accrued unpaid items in an escrow between the principals is known as:

1) adjustment
2) roll over
3) prorating
4) amortization

Answer 1

Prorating is the adjustment of prepaid and accrued items in an escrow, ensuring a fair division of costs between buyer and seller.

Step-by-step explanation:

The adjustment of prepaid items and accrued unpaid items in an escrow between the principals is known as prorating. This term refers to the allocation process between the buyer and seller of a property for items such as property taxes, insurance premiums, or homeowners' association fees that have been prepaid or are owed beyond the closing date. The purpose of prorating is to fairly divide these costs so that each party is responsible for their portion of expenses up to or from the closing date.

The adjustment of prepaid items and accrued unpaid items in an escrow between the principals is known as prorating.