Question

The seller and the buyer finally agreed to a purchase price of $203,500 with the closing to occur on June 15. The taxes for the year in the amount of $2,500 have not been paid by the seller. (Taxes are paid in arrears). How much would the tax proration amount to, and how would it appear on a full settlement statement? Base your answer on a 365 day year, and the buyer is responsible for the day of settlement.

Answer 1

Answer:

$1,130.137 debit the seller and credit the buyer.

Explanation:

Given that:

• Purchase price : $203,500
• Time: June 15.
• Taxes:  $2,500 have not been paid by the seller, it means the tax is settled by the seller

Assume 365 day year (30 days per month) , he purchased at June 15 so the number of outstanding  days is:

(5 months * 30)+ 15= 165

Hence, the tax pay per day is:

$\frac{2500}{365}$ = $6.849315 per day

=> the outstanding tax = tax pay per day*number of outstanding  days

=  $6.849315*165  

= $1,130.137

So $1,130.137 debit the seller and credit the buyer.