Arizona Real Estate License Practice Exam 2026 – All-in-One Resource to Pass with Confidence!

The situation involves a lender requiring a two-month reserve for insurance at the time of closing. Since the premium is paid outside of closing, the buyer must provide funds for this reserve to the lender, which makes the buyer responsible for this cost.

When preparing a closing statement, a reserve amount is typically debited to the party making the payment or contributing to the reserve. In this case, because the buyer must provide this reserve, the closing statement will reflect a debit to the buyer for the two-month insurance reserve. This is a standard practice to ensure that the lender has funds set aside to cover insurance costs during the early months of the loan, which protects both the lender and the property.

The other options would not accurately reflect the transaction, as the seller is not responsible for the insurance reserve in this case, and a credit to the buyer or stating that there is no entry does not align with how reserves are recorded on the closing statement. Thus, the entry should correctly be a debit to the buyer for the reserve.