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 prepaid rent credit of $280 at closing, as the seller is responsible for the day of closing. This amount reflects the prorated share of the prepaid rent for the period after the closing date.
A) 340
This option is incorrect because it overestimates the amount of prepaid rent that should be credited to the buyer. The calculation does not account for the fact that the seller is responsible for the day of closing, which impacts the proration of the prepaid rent.
B) 320
This option is also incorrect. It incorrectly assumes a higher proration than what should be calculated based on the closing date. The prorated amount does not align with the actual number of days the buyer will occupy the property after the closing.
C) 280
This option is correct as it accurately reflects the prorated amount of prepaid rent that the buyer should receive. The calculation is based on the fact that there are 13 days remaining in the month after the closing date, with a daily rent amount of $20, leading to a total credit of $280 for the buyer.
D) 260
This option is incorrect because it underestimates the prepaid rent credit. It does not properly consider the correct number of days the buyer will benefit from the prepaid rent following the closing date, resulting in a lower amount than warranted.
Conclusion
The correct answer, $280, is derived from a precise calculation of the prepaid rent based on the closing date. All other options fail to accurately reflect the prorated rent amount owed to the buyer due to improper calculations regarding the number of days the seller remains responsible. Hence, option C is definitively the right choice.