ADJUSTING ENTRIES AND FINANCIAL STATEMENTS The unadjusted trial balance for Mitchell Pharmacy appears below.

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

. Prepare the adjusting entries.

. Prepare an income statement, a statement of changes in retained earnings, and a balance sheet using adjusted account balances.

. Why would you not want to prepare financial statements until after the adjusting entries are made?