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21 December, 03:52

A sale transaction closes on July 4. The day of closing belongs to the seller. On January 1, the seller paid a hazard insurance premium of $375 for the calendar year. According to the 12-month/30-day method, what is the seller's share of the insurance premium?

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  1. 21 December, 04:02
    0
    Answer:Sellers share = $191.67

    Explanation:

    we assume the amount of $375 is the insurance premium paid for the entire year

    insurance premium for the year = $375/12 months = $31.25 a month.

    Sellers share Period = 6 months plus 4 days (from 1 January to June 30 plus 4 days of July)

    Sellers share = ($31.25 x 6) + (4 x 31.25/30 days) = 191.666667

    Sellers share = $191.67
  2. 21 December, 04:17
    0
    The seller's share of the insurance premium is $191.67

    Explanation:

    The seller paid a hazard insurance premium of $375. According to the 12-month/30-day method:

    We divide this amount by 12 to obtain an average monthly rate Average daily rate is equal to the monthly rate divided by 30 Seller share = (monthly rate * the number of months of ownership in the year of the sale up to the month of closing) + (daily rate * number of days of ownership in month of closing)

    Therefore:

    Total amount $375

    Monthly amount rate $375/12 = $31.25

    Daily amount rate $31.25/30 = $1.042

    From January 1 to July 4 they are 6 months and 4 days, Therefore:

    Seller's share = ($31.25 * 6) + ($1.042 * 4) = $187.5 + $4.168 = $191.67

    The seller's share of the insurance premium is $191.67
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