Question

 If property owners fail to pay their taxes in a timely fashion, this can create a first lien on the mortgaged property. In order to protect against this, the closing agent

 would likely do which of the following under the circumstances described below? Closing is taking place on April 15, 2020. Property taxes in the amount of $1,460 for 2019 are currently due but not yet paid. For your reference, the number of days in each month are provided below:

 January 31

 February 29

 March 31

 April 30

•  Debit the Seller $1,880, credit the Buyer $424

•  Debit the Seller $1,880, credit the Buyer $1,894

•  Debit the Seller $1,880, credit the Buyer $1,880

•  Debit the Seller $1,880, credit the Buyer $420

Answer 1

The correct answer is

Debit the seller $ 1880, credit the buyer $ 420

Explanation

Property taxes for 2020

= No. of days property used by seller / total days * 1460

= ( 31+29+31+14)/365*1460

= 420

So upto 15 days taxes of $ 1880 (1460+420) will be paid by the seller and since the net property taxes will be raised on new buyer, so it has been given the credit for $ 420

So the correct answer is

Debit the seller $ 1880, credit the buyer $ 420