The sale of a four family building will be closed on July 15. The seller collected rent from unit A $600, B $550, C $650, and D $650 for July. How should the rent be pro-rated on the closing statement? Who will be credited and debited and for how much?
To prorate the rent on the closing statement, you will need to calculate the portion of the rent that belongs to each party based on the number of days they occupied the property in July. Here's how you can calculate the prorated rent for each unit:
1. Determine the total number of days in July: Since July has 31 days, the total number of days in July is 31.
2. Calculate the daily rent for each unit: Divide the monthly rent of each unit by the total number of days in July. For example:
- Unit A: $600 / 31 = $19.35 per day
- Unit B: $550 / 31 = $17.74 per day
- Unit C: $650 / 31 = $20.97 per day
- Unit D: $650 / 31 = $20.97 per day
3. Determine the number of days each unit was occupied in July: This will depend on the closing date, so let's assume the closing date is July 15. In this case:
- Unit A: 15 days
- Unit B: 15 days
- Unit C: 15 days
- Unit D: 15 days
4. Calculate the prorated rent for each unit: Multiply the daily rent (calculated in step 2) by the number of days each unit was occupied (calculated in step 3). For example:
- Unit A: $19.35 x 15 = $290.25
- Unit B: $17.74 x 15 = $266.10
- Unit C: $20.97 x 15 = $314.55
- Unit D: $20.97 x 15 = $314.55
Now that we have the prorated rent for each unit, we can determine the credits and debits on the closing statement as follows:
1. The seller will be credited with the prorated rent for the days they owned the property in July. So, the seller will be credited with:
- Unit A: $290.25
- Unit B: $266.10
- Unit C: $314.55
- Unit D: $314.55
2. The buyer will be debited with the prorated rent for the days they will own the property in July. So, the buyer will be debited with:
- Unit A: $290.25
- Unit B: $266.10
- Unit C: $314.55
- Unit D: $314.55
This ensures that the seller receives credit for the rent collected before the sale, and the buyer pays their portion for the days they will own the property in July.