What is the correct statement entry for interest if the buyer assumed a seller's existing 7%, $180,000 deed of trust?

When a buyer assumes a seller's existing mortgage, like a deed of trust in this case, the buyer takes over the obligation to pay the lender. The interest on the assumed loan must be calculated based on the terms of the loan, which, in this example, has an interest rate of 7% on a principal amount of $180,000.

To find the monthly interest payment, you can use the formula for interest, which is: Interest = Principal x Rate. So, for this situation, it would be:

Interest = $180,000 x 0.07 / 12

This calculation gives:

Interest = $180,000 x 0.07 = $12,600 annually. To convert this to a monthly figure, divide by 12:

$12,600 / 12 = $1,050 monthly interest.

Having this in mind, if the buyer is responsible for paying this interest, this results in a debit to the buyer. More specifically, the buyer's obligations are recorded as a debit which reflects the amount they owe for the interest of the assumed loan.

In this case, the $420 reflects the interest due for a partial month or specific calculation related to how the payment is structured in the transaction