GHI Enterprises recorded the following balances on December 31, 2023:

• Cash: $8,000
• Accounts Receivable: $14,000
• Prepaid Insurance: $3,000
• Accounts Payable: $5,000
• Wages Payable: $2,000
• Equipment: $45,000
• Accumulated Depreciation: $7,000
• Notes Payable: $20,000
• Common Stock: $18,000
• Retained Earnings: $18,000

Requirements:

1. Prepare a trial balance.
2. Record adjusting entries for:
   • Depreciation expense: $3,500
   • Prepaid insurance expired: $1,000
3. Prepare an adjusted trial balance.
4. Create a statement of owner's equity.
5. Explain the significance of prepaid expenses in accounting.