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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. How much would the tax proration amount to, and how would it appear on a full settlement statement?
A) $1,130.14 debit the seller and credit the buyer.
B) $1,130.14 debit the buyer and credit the seller.
C) $2,500 credit the seller and debit the buyer.
D) Nothing. The seller does not owe since the buyer is buying.

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Answer:

A) $1,130.14 debit the seller and credit the buyer.

Explanation:

After agreeing to the sale there is still the tax to be settled by the seller.

He is owing from beginning of the year to June 15.

Assume a 365 day year at 30 days per month, outstanding days will be (5 months * 30)+ 15= 165

The tax per day will be $2,500/365= $6.849315 per day

The outstanding tax= 6.849315* 165

Outstanding tax= $1,130.137~ $1,130.14

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