XYZ Inc. had the following account balances on September 30, 2023:

• Cash: $10,000
• Accounts Receivable: $8,000
• Prepaid Rent: $2,000
• Accounts Payable: $6,000
• Wages Payable: $1,500
• Machinery: $25,000
• Accumulated Depreciation: $5,000
• Long-term Debt: $15,000
• Common Stock: $10,000
• Retained Earnings: $7,500

Requirements:

1. Prepare a trial balance.
2. Record adjusting entries for:
   • Depreciation expense: $1,000
   • Prepaid rent expired: $500
3. Prepare an adjusted trial balance.
4. Create an income statement.
5. Explain the purpose of adjusting entries in the accounting cycle.