As of March 31, 2025, ABC Enterprises has the following balances:

Account	Amount
Cash	$10,000
Accounts Receivable	$15,000
Inventory	$22,000
Prepaid Insurance	$2,500
Office Equipment	$35,000
Accumulated Depreciation	$7,000
Accounts Payable	$13,000
Salaries Payable	$3,000
Long-Term Notes Payable	$9,000
Common Stock	$40,000
Retained Earnings	$13,500

Requirements:

1. Prepare a classified balance sheet.
2. Compute the acid-test (quick) ratio.
3. Assess the company's liquidity.
4. Make the adjusting entries for:
   • Depreciation expense: $3,500
   • Insurance expense: $1,250
5. Describe the effects of adjusting entries on the income statement.