Posted: August 9th, 2016

What is a pay off?


Jake’s Computer Repair Service earned a small profit for the month of January 20×1. Jones expects the business to continue operating into the foreseeable future. In fact, he expects the business to grow so long as it continues to provide customers with excellent service.

The following transactions take place in February 20×1:

a. Feb. 1, 20×1. Jones pays off the accounts payable balance of $410 in cash.
b. Feb. 2, 20×1. Jones contracts a local advertising agency, Hype!, Inc. The agency offers to provide six months
of customized advertising and promotional services for a fee of $1,200. Jones agrees and mails a check to Hype!, Inc. for the full amount. Hint: Record a prepaid expense.
c. Feb. 24, 20×1. Jones receives a utility bill for the month of February, $490. This amount is due on March 6,
20×1, and is still payable at month end.
d. Feb. 28, 20×1. Service revenues for the month total $5,300: $3,900 cash and $1,400 on account.
e. Feb. 28, 20×1. A customer brings in a laptop for repair and a software upgrade. The customer writes a check for $120 to cover the service. Jones begins work on the laptop on March 2, 20×1.
f. Feb. 28, 20×1. Jones pays rent of $500 in cash.
g. Feb. 28, 20×1. Jones withdraws $1,000 in cash.
h. Feb. 28, 20×1. Wages are paid during the month, amounting to $900 in cash.

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