Closing is on May 10 and the monthly water bill is due in advance on the first of each month. If the seller did not pay the water bill of $39.06, which of the following should appear on the closing statement?
Debit seller $27.72
The seller is responsible for paying the water bill up until the closing date, which is May 10. Since the bill is due in advance on the first of the month and the seller did not pay the $39.06 bill, the seller needs to be debited for the portion of the water bill that covers the period from May 1 to May 10, which totals $27.72.
This choice correctly reflects the seller's obligation for the water bill incurred up to the closing date. Since the monthly bill is for $39.06 and covers the whole month, the calculation for the days before closing (10 days) results in a charge of $27.72 to the seller for their unpaid portion.
This choice incorrectly assigns a credit to the buyer instead of debiting the seller. The buyer should not receive a credit for the seller’s unpaid water bill as they are not responsible for the seller's outstanding obligations prior to the closing date.
This choice inaccurately divides the water bill between the seller and the buyer. The buyer should not be charged for any portion of the seller's unpaid bill; the entire amount owed should fall on the seller until the closing date.
This choice misallocates the charges by debiting the buyer for a portion of the seller's bill and incorrectly reduces the seller's responsibility. The buyer should not incur any charges for the seller's unpaid bill, which is solely the seller's responsibility.
In conclusion, the amount owed for the water bill reflects the seller's obligation through the closing date. Therefore, the appropriate entry on the closing statement is to debit the seller $27.72, ensuring that the buyer is not held responsible for the seller's unpaid expenses. This handling accurately represents the financial responsibilities of each party involved in the transaction.
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