DEF Enterprises Financial Snapshot as of September 30, 2024:

• Cash: $14,700
• Accounts Receivable: $9,800
• Inventory: $18,600
• Prepaid Rent: $3,000
• Office Equipment: $35,000
• Accumulated Depreciation: $7,500
• Accounts Payable: $11,400
• Notes Payable: $6,700
• Common Stock: $22,000
• Retained Earnings: $27,500

Requirements:

1. Prepare a classified balance sheet.
2. Compute the acid-test ratio.
3. Analyze DEF Enterprises' liquidity.
4. Prepare the adjusting journal entries for:
   • Depreciation expense for the year: $3,500
   • Rent expense for the year: $1,500
5. Explain the significance of prepaid expenses in financial statements.