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 2012.
b. Depreciation expense for 2011 is $10,130.
c. Four months€™ interest at 10 percent 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?

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Mitchell Phamacy Unadjusted Trial Balance December 31, 2011 Account Debit Credit Cash Accounts Receivable Inventory Prepaid Insurance Building Accumulated Depreciation (Building) Land Other Assets Accounts Payable Notes Payable (due 2013) Common Stock Retained Earnings, 12/31/2010 Service Revenue Wages Expense Interest Expense $3,400 64,820 583,400 11,200 230,000 44,000 31,200 25,990 47,810 150,000 600,000 41,200 950,420 871,420 12,000 Total $1,833,430 $1,833,430