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Seller Jamison is closing on his property with buyer Conrad. Jamison paid the current year's property taxes already. Is this a prepaid or accrued expense, and how will it be represented on the settlement statement

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In the given case, it is the taxes are a prepaid expense and will it be represented on the settlement statement as a buyer debit and a seller credit.

A party's debit is the sum that must be paid.

The amount that appears as a sum in the party's favor is known as credit. It may have previously been paid, reimbursed, or promised.

Buyer Debit consists of:

  • The cost of purchasing the property
  • Prorated amounts for products the seller has already paid
  • Expenses

Seller Credit consists of:

  • Purchase price
  • The buyer's share of any prorated items that the seller has prepaid

Hence, in the given case where seller Jamison is closing on his property with buyer Conrad. Jamison paid the current year's property taxes already. The taxes are a prepaid expense and will appear as a buyer debit and a seller credit.

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