86. The seller of an investment property has received 1 month (30 days) prepaid rent in the amount of $600 on September 1. The closing of the transaction is scheduled for September 17. What is the amount of prepaid rent credited to the buyer if the seller is responsible for the day of closing
Answer: C
The amount of prepaid rent credited to the buyer is $280.
The buyer will receive a credit of $280 for prepaid rent, as the seller is responsible for the day of closing, which affects the allocation of the rent for the month.
A) 340
This option is incorrect because calculating $340 would imply that more days of rent are being considered than actually applicable to the buyer. The total prepaid rent of $600 must be divided appropriately based on the number of days and the seller's responsibility on the day of closing.
B) 320
Option B is also incorrect. A credit of $320 would suggest that the buyer is receiving credit for too many days of the month. The correct calculation for days leads to a much lower amount than this.
C) 280
This option is correct. The calculation involves determining the daily rent by dividing the total prepaid rent of $600 by 30 days, resulting in a daily rent of $20. Since the transaction closes on the 17th, the seller is responsible for 17 days, which leaves 13 days that the buyer is entitled to. Thus, the buyer receives 13 days of rent credit, equating to $260, and with the seller covering the 17th, the total credit to the buyer is $280.
D) 260
Option D is incorrect as it does not account for the full credit due to the buyer. While it captures the rent for 13 days ($260), it overlooks the seller’s responsibility on the day of closing, which adds an additional day of rent to the buyer's credit.
Conclusion
The correct answer of $280 accurately reflects the buyer's entitlement to the prepaid rent given the seller's responsibility on the day of closing. All other options miscalculate the number of days or the resulting credit, failing to represent the proper allocation of the prepaid rent.