Question 34

Debit seller $27.72

The seller should be debited $27.72 on the closing statement because this amount reflects the seller's share of the monthly water bill that remains unpaid as of the closing date.

A) Debit seller $27.72

This option is correct as it accurately represents the seller's responsibility for the unpaid portion of the water bill. Since the monthly water bill is due in advance on the first of the month and closing occurs on May 10, the seller is responsible for the days from May 1 to May 10, which amounts to $27.72.

B) Credit the buyer $27.72

This option is incorrect because it suggests that the buyer is receiving a credit for the water bill, which is not appropriate. The buyer should not be credited for the seller's unpaid bill, as the responsibility lies with the seller until the closing occurs.

C) Debit seller $13.86; debit buyer $13.86

This option is also incorrect. Debiting both the seller and the buyer for equal amounts of the water bill does not reflect the actual responsibility of payment. The buyer should not be debited at all since the payment obligation for the unpaid bill rests solely with the seller.

D) Debit buyer $27.72; debit seller $11.34

This option is incorrect as it inaccurately divides the water bill responsibility between the buyer and seller. The seller is solely responsible for the unpaid bill at the time of closing, and thus should not have any debit assigned to the buyer.

Conclusion

The correct option is to debit the seller $27.72, as this accurately reflects the seller's liability for the unpaid water bill up to the closing date. All other options fail to correctly allocate the responsibility for the water bill, either by misassigning costs to the buyer or by incorrectly splitting the debt. This reinforces the principle that the seller is accountable for any bills due before the closing date.