Adjusting Entries and Financial Statements 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 \(\$ 2,180\) of the prepaid insurance is coverage for 2019 .

b. Depreciation expense for 2018 is \(\$ 10,130\).

c. Four months' interest at \(10 \%\) is owed but unrecorded and unpaid on the notes payable.

d. Wages of \(\$ 4,950\) are owed but unpaid and unrecorded at December 31 .

e. Income taxes of \(\$ 11,370\) are owed but unrecorded and unpaid at December 31 .
\section*{Required:}
1. Prepare the adjusting entries.
2. Prepare a statement of earnings, a statement of retained earnings, and a statement of financial position using adjusted account balances.
3. CONCEPTUAL CONNECTION Why would you not want to prepare financial statements until after the adjusting entries are made?
\section*{Problem

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Account Cash Accounts Receivable Inventory Prepaid Insurance Mitchell Pharmacy Unadjusted Trial Balance December 31, 2018 Debit Credit $ 3.400 64.820 583.400 11,200