Alaska Real Estate Exam: Proration Calculations Step by Step

Last updated: April 2026

For many aspiring real estate licensees, the math portion of the state exam is the most intimidating hurdle. Among the various mathematical concepts tested, proration calculations frequently trip up students. Whether you are dealing with property taxes in the Municipality of Anchorage or rent divisions for a multi-family property in Fairbanks, understanding how to fairly divide expenses between a buyer and seller is a critical skill. This guide will walk you through proration calculations step by step to ensure you are fully prepared for the test. For a broader overview of what to expect on your test day, be sure to review our Complete Alaska Exam Guide.

Understanding Prorations in Alaska Real Estate

Proration is the allocation or dividing of certain money items at the closing. When a property changes hands, there are almost always ongoing expenses (like property taxes, homeowner association dues, or utilities) or ongoing income (like tenant rent) that overlap the closing date. Prorating ensures that the seller pays only for the days they owned the property, and the buyer pays only for the days they own the property.

To master these calculations, you must understand two foundational concepts: Accrued items and Prepaid items.

• Accrued Items (Paid in Arrears): These are expenses that are accumulating but have not yet been paid by the seller. Examples include water bills or property taxes that are billed at the end of the year. At closing, the buyer will get a Credit for the seller's share, and the seller will receive a Debit.
• Prepaid Items (Paid in Advance): These are expenses the seller has already paid for a period that extends beyond the closing date. An example is an annual HOA fee paid on January 1st. At closing, the seller receives a Credit for the unused portion, and the buyer receives a Debit.

Understanding how these items are documented in the purchase agreement is crucial. You can learn more about standard contract stipulations in our guide to Alaska Contract Essentials and Elements.

The Two Proration Methods: 360-Day vs. 365-Day

The Alaska real estate exam will specify which calendar method to use for your calculation. If it doesn't, standard practice dictates using the statutory year. You must know both:

1. The Statutory Year (Banker's Year)

This method assumes every month has exactly 30 days, resulting in a 360-day year (30 days x 12 months). This simplifies the math significantly. If you are calculating a daily rate, you divide the annual cost by 360.

2. The Calendar Year (Actual Days)

This method uses the exact number of days in each month, totaling 365 days in a year (or 366 in a leap year). When using this method, you must count the exact days. For example, January has 31 days, February has 28, etc. To find the daily rate, you divide the annual cost by 365.

Step-by-Step Proration Calculation Guide

Follow this exact sequence whenever you encounter a proration question on the Alaska real estate exam:

1. Identify the Total Amount and the Period: What is the total bill, and what timeframe does it cover (annual, quarterly, monthly)?
2. Calculate the Daily Rate: Divide the total amount by the number of days in the period (using either 360 or 365 as instructed). Tip: Do not round your daily rate too early; keep it to at least four decimal places to ensure accuracy.
3. Determine Who Owns the Day of Closing: Unless the exam question specifically states otherwise, standard exam practice assumes the seller owns the day of closing. This means the seller is responsible for expenses (and entitled to income) on the closing date.
4. Count the Days: Determine exactly how many days the seller is responsible for, and how many days the buyer is responsible for.
5. Multiply and Assign: Multiply the daily rate by the number of days owed. Assign the resulting amount as a debit to the party who owes the money and a credit to the party receiving it.

Real-World Alaska Scenario: Property Tax Proration

Let’s look at a practical example involving property taxes. In Alaska, local boroughs handle property taxes, and billing schedules vary. For this example, let's assume property taxes are paid annually in advance.

The Scenario:
A home in the Matanuska-Susitna Borough is closing on August 15th. The annual property taxes are $4,200, and the seller has already paid them in full for the calendar year. Using a 360-day (statutory) year, calculate the proration. Assume the seller owns the day of closing.

The Solution:

• Step 1: Total amount = $4,200. Period = 1 year (360 days).
• Step 2: Daily Rate = $4,200 / 360 = $11.6667 per day.
• Step 3 & 4: Count the buyer's days (since the seller already paid, we need to know how much the buyer must reimburse the seller).
  • August: 15 days remaining (30 - 15 days the seller owned)
  • September: 30 days
  • October: 30 days
  • November: 30 days
  • December: 30 days
  • Total Buyer Days = 135 days
• Step 5: Multiply daily rate by buyer's days: $11.6667 x 135 = $1,575.00.

Result: Debit the Buyer $1,575.00; Credit the Seller $1,575.00.