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?

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:

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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