Mr. Smith is opening his own automotive collision repair shop where he will fix wrecked vehicles. He knows he will have direct materials costs for any parts and paint he has to order to repair and paint the vehicles. Mr. Smith does not know how to account for the repair jobs he performs.

As Mr. Smith is in a service organization, he will not have raw materials, work-in-process, or finished good inventory accounts as a manufacturing company would. Some service companies do not use a work-in-process accounts but instead simply charge costs directly to expense accounts, which Mr. Smith has opted to do for simplicity.

Mr. Smith completed the following journal entries last month.

Purchased parts for a specific repair job (Job Number: 0123) on account.

Parts Supplies $1,200

Accounts Payable $1,200

Purchased paint for a specific repair job (Job Number: 0145) with cash.

Paint Supplies $1,500

Cash $1,500

Purchased detailing supplies on account. (This includes glass cleaner, wax, tire shine. – To be used for any detailing work Mr. Smith will perform in addition to collision repair jobs, but will not be allocated to specific repair jobs.)

Detailing Supplies $500

Accounts Payable $500

Purchased vehicle repair supplies on account. (This includes sanding pads, primer, putty, etc. – To be used for Mr. Smith’s collision repair jobs, but will not be allocated to specific jobs.)

Repair Supplies $2,500

Accounts Payable $2,500

Mr. Smith is paid a salary as the owner of his business and the sole employee. Record Mr. Smith’s salary in the amount of $1,250.

Salary Expense $1,250

Cash $1,250

Use the transactions listed above and prepare month-end adjusting journal entries to Cost of Goods Sold.