GHI Inc. Account Balances as of December 31, 2023:

Account	Amount
Cash	$12,000
Accounts Receivable	$8,000
Inventory	$15,000
Prepaid Insurance	$2,000
Equipment	$25,000
Accumulated Depreciation	$5,000
Accounts Payable	$10,000
Notes Payable	$7,000
Common Stock	$20,000
Retained Earnings	$20,000

Requirements:

1. Prepare a classified balance sheet.
2. Compute the current ratio and quick ratio.
3. Analyze the liquidity position of GHI Inc.
4. Prepare the adjusting journal entries for the following:
   • Depreciation expense for the year: $2,500
   • Insurance expense for the year: $1,000
5. Discuss the importance of adjusting entries in financial reporting.