Accrued interest on an assumed mortgage loan is entered on the closing statement as:

• A. A debit to the seller and a credit to the buyer
• B. A debit to both the seller and the buyer
• C. A credit to the seller and a debit to the buyer
• D. A credit to both the seller and the buyer

Answer: (A)

Verified step by step guidance

1. Understand the concept of accrued interest: Accrued interest refers to the interest that has accumulated on a loan but has not yet been paid. In the context of a mortgage loan, this interest is typically calculated up to the closing date of the transaction.
2. Identify the parties involved: In a real estate transaction, the seller is responsible for the mortgage loan up to the closing date, while the buyer assumes responsibility for the loan after the closing date.
3. Determine the impact on the closing statement: Since the seller owes the accrued interest up to the closing date, it is recorded as a debit to the seller. Conversely, the buyer assumes the mortgage loan and receives a credit for the accrued interest.
4. Analyze the options provided: The correct entry must reflect the financial responsibility of the seller for the accrued interest and the buyer's assumption of the loan. This aligns with the option 'A debit to the seller and a credit to the buyer.'
5. Conclude the reasoning: The closing statement ensures that financial obligations are accurately allocated between the seller and the buyer. Accrued interest is debited to the seller because it is their responsibility, and credited to the buyer as part of the loan assumption.