Chapter 14 Flashcards
What is a debit in a closing statement?
Entry that shows an expense, or an amount that will be paid
What is a credit in a closing statement?
Entry that shows an amount received, or that will be received
What does it mean when you “debit the seller” in a closing statement?
An entry that reduces the amount a seller will receive at closing
What does it mean when you “credit the buyer” in a closing statement?
An entry which reduces the amount a buyer has to pay at closing
What is a double entry line?
An expense that is credited to one party and debited to the other
How does the seller’s brokerage fee appear on a closing statement?
Single line entry, debit to the seller
It would show up as a credit (disbursement) on the broker’s statement
How does a binder (earnest money) show up on a closing statement?
Credit to the buyer
It would show up as a debit (receipt) on the broker’s statement because they currently have the money and need to pay it to the seller
How would an assumed mortgage show up on a closing statement?
Double entry line. Debit to the seller and credit to the buyer
How does a new loan show up on a closing statement?
Single line entry
Credit to the buyer
Which expenses would be divided proportionately between the buyer and the seller on closing?
Prorations like rent, taxes, HOA dues
They show up as double entries on the closing statement
How is the part that “owns” the property the day of closing established?
It is written in the contract
What does it mean when something is paid in arrears?
Something that is paid on the back end, after service is received, like taxes. They are determined at the end of the year and due the following year
How would you enter rent paid in a closing statement?
Rent is paid in advance, so the seller has already received rent for the full month.
Debit the seller, credit the buyer
What are the types of state taxes due at closing?
Document stamp tax on the deed
Document stamp tax on the promissory note
Intangible tax
How is the tax on the deed calculated?
Multiply the purchase price by .007 (or 0.006 in Miami Dade County) and round to the nearest whole number
