Question

The annual property taxes of $1,700 were paid in arrears by the buyer. If the closing took place on June 4th and the seller paid through the day of closing, how did this appear on the settlement sheet if the 360-day method is used

Answer 1

727 debit seller, credit buyer

Step-by-step explanation:

To begin, it is imperative to find the monthly tax rate.

Therefore, we have;

$1,700 ÷ 12 = $141.67 monthly rate.

This can be pruned further to obtain our daily rate. Hence,

$141.67 ÷ 30 = $4.72 daily rate

Seller owes 5 months - first 5 months of the previous year: $141.67 x 5 = $708.35

Additionally, the seller owes 4 days(this represents 1st to 4th of June):

Therefore, we have;

$4.72 x 4 = $18.88

Total amount that will appear on the settlement sheet is thus;

$708.35 + $18.88 = $727 debit seller, credit buyer