Prorated expenses Flashcards
(20 cards)
What does a debit to one party mean?
Credit to another party
In a closing statement, what is true about the dollar amount of the debit and credit?
They are the same
What is the 360-day method?
Each month is counted as 30 days
What is the 365-day method?
Based on actual number of days in each month
How can you remember what debit is?
Debit = DEAD = increases expenses, assets, and dividends
How can you remember what credit is?
Credit = Clear = increases liabilities, equity, and revenue
The buyer is credited at closing for what?
The time seller owned the property
For prepaid rent, what are the entries for seller and buyer?
- Debit seller
- Credit buyer
Why does the buyer receive a credit for prepaid rent?
The seller received rent beyond closing date; buyer takes over
How do you calculate the prepaid rent debit/credit?
- Monthly rent % days in month = rent per day
- Rent per day * days owed buyer = amount of proration
Mortgage interest is what entry for seller and buyer?
- Debit seller
- Credit buyer
What is the entry for a mortgage assumed by the buyer?
- Credit buyer
- Debit seller
What is the significance of the buyer assuming the seller’s existing loan?
Buyer doesn’t need cash at closing for that amount
What is the purchase price entry for the seller and buyer?
- Credit seller
- Debit buyer
What is the entry for an earnest money deposit?
Credit to the buyer
What is the entry for a new mortgage loan given to the buyer?
Credit to the buyer
What are the entries for a new purchase money mortgage given to the seller?
- Credit to the buyer
- Debit to the seller
What are the only entries that are a credit to the seller?
- Purchase price
- Any items the seller prepaid
The documentary stamp tax is typically paid by the ___
seller
The documentary stamp tax is a debit/credit on the seller side
debit (because they pay it)
