The unadjusted trial balance for Mitchell Pharmacy appears below.

Mitchell Pharmacy

Unadjusted Trial Balance

43830

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 2020.
b. Depreciation expense for 2019 is $10,130.
c. Four months' interest at 10% is owed but unrecorded and unpaid on the note 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.
Required:
1. Prepare the adjusting entries.
2. Prepare an income statement, a retained earnings statement, and a balance sheet using adjusted account balances.
3. Why would you not want to prepare financial statements until after the adjusting entries are made?

Transcribed Image Text:

Debit Credit Account Cash 3,400 64,820 Accounts Receivable Inventory Prepaid Insurance Building Accumulated Depreciation Land 583,400 11,200 230,000 $ 44,000 31,200 25,990 Other Assets Accounts Payable Notes Payable (due 2021) 47,810 150,000 Common Stock 600,000 41,200 950,420 Retained Earnings, 12/31/2018 Service Revenue Wages Expense Interest Expense Totals 871,420 12,000 $1,833,430 $1,833,430