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 pro-rate the rent on the closing statement, you need to calculate the portion of the rent that belongs to the seller and the portion that belongs to the buyer. This is typically based on the number of days the seller and buyer own the property within the rental period.
Let's assume that July has 31 days. To calculate the seller's portion, you need to determine how many days they owned the property in July. Since the closing date is July 15, the seller owned the property for 15 days (from July 1 to July 15).
To calculate the buyer's portion, subtract the number of days the seller owned the property from the total number of days in July. In this case, the buyer would own the property for 31 - 15 = 16 days (from July 16 to July 31).
Next, you need to determine the daily rental rate for each unit:
Unit A: $600 / 31 days = $19.35 per day
Unit B: $550 / 31 days = $17.74 per day
Unit C: $650 / 31 days = $20.97 per day
Unit D: $650 / 31 days = $20.97 per day
Now, you can calculate the pro-rated rent for each unit:
Seller's portion:
Unit A: $19.35 per day * 15 days = $290.25
Unit B: $17.74 per day * 15 days = $266.10
Unit C: $20.97 per day * 15 days = $314.55
Unit D: $20.97 per day * 15 days = $314.55
Buyer's portion:
Unit A: $19.35 per day * 16 days = $309.60
Unit B: $17.74 per day * 16 days = $283.84
Unit C: $20.97 per day * 16 days = $335.52
Unit D: $20.97 per day * 16 days = $335.52
On the closing statement, the seller will be credited with the pro-rated rent for the period they owned the property, and the buyer will be debited with the same amount. Here's the breakdown:
Seller:
Unit A: $290.25 credited
Unit B: $266.10 credited
Unit C: $314.55 credited
Unit D: $314.55 credited
Buyer:
Unit A: $309.60 debited
Unit B: $283.84 debited
Unit C: $335.52 debited
Unit D: $335.52 debited
Please note that these calculations are based on the assumption that the rent is evenly distributed throughout the month and that there are no other factors that may affect the rent distribution.