Question

Sally and Sam have sold their home to Tina and Max. The closing is set for August 23. The insurance policy of $1,700 was prepaid. Using the 12 month/30 day method, what will be Tina and Max’s share of the insurance expense and how will it be handled on the settlement statement?

Answer 1

$599.75 will be credited to the seller and debited to the buyer.

Step-by-step explanation:

The value is given as

Per year share is given as $1,700 ÷ 12 = $141.67

Per day share is given as $141.67 ÷ 30 = $4.72

For the seven Months, Seller share is

$141.67 x 7 = $991.69

For the 23 days of August, Seller share is

$4.72 x 23 = $108.56

Total Seller share is

$991.69 + $108.56 = $1,100.25

The Buyer share is as

$1,700 - $1,100.25 = $599.75

So $599.75 will be credited to the seller and debited to the buyer.