A closing is March 5 for a rental property with an annual tax bill of $2800. Calculate and show the debit and credits for the tax proration between the buyer and seller using the 365 day method, the day of closing belongs to the buyer.

The debit and credits for the tax proration will be as follows:

Debit seller for $483.29; and Credit buyer for $483.29.

Step-by-step explanation:

The assignment of how much is owed to the responsible party is the major reason of a proration.

For the days owned by the seller, the buyer needs money from the seller since the buyer will pay the taxes at end of the year.

Amount per day = Annual tax bill / 365 = $2800 / 365 = $7.67

Total number of days from January 1 to a day before March 5 = Number of days in January + Number of days in February + Number of days from March 1 to March 4 = 31 + 28 + 4 = 63

Amount the seller owes for the time he owned = Amount per day * Total number of days from January 1 to a day before March 5 = $7.67 * 63 = $483.29

Therefore, the debit and credits for the tax proration will be as follows:

Debit seller for $483.29; and Credit buyer for $483.29.

14

step-by-step explanation: