The unadjusted trial balance for Mitchell Pharmacy appears below.

The following information is available at year-end for adjustments:
a. An analysis of insurance policies indicates that $1,400 of the prepaid insurance is coverage for 2010.
b. Depreciation expense for 2009 is $8,800.
c. Four months' interest at 8 percent is owed but unrecorded and unpaid on the note payable.
d. Wages of $4,410 are owed but unpaid and unrecorded at December 31.
e. Income taxes expense, computed at 30 percent of income before taxes, is owed but unrecorded and unpaid at December 31.

Required:
1. Prepare the adjusting entries.
2. Prepare an income statement, a statement of changes in retained earnings, and a balance sheet using adjusted account balances.
3. Why would you not want to prepare financial statements until after the adjusting entries aremade?

Mitchell Pharmacy Unadjusted Trial Balance December 31, 2009 Debit Credit $ 3,400 64,820 583,400 11,200 230,000 Accounts Receivable Inventory Prepaid Insurance Building Accumulated Depreciation, Building Land Other Assets Accounts Payable Notes Payable (due 2011) Common Stock Retained Earnings, 12/31/2008 Service Re Wages Expense Interest Expense $ 44,000 31,200 25,990 47,810 150,000 600,000 41,200 950,420 871,420 12,000 $1,833,430 Total $1,833,430