On December 31, 2025, DEF Co. has the following balances:

• Cash: $14,000
• Accounts Receivable: $9,000
• Inventory: $17,000
• Prepaid Rent: $2,800
• Vehicles: $50,000
• Accumulated Depreciation: $10,000
• Accounts Payable: $11,000
• Interest Payable: $1,500
• Mortgage Payable: $25,000
• Common Stock: $35,000
• Retained Earnings: $23,300

Requirements:

1. Draft a balance sheet separating current and non-current items.
2. Calculate the current ratio.
3. Analyze DEF Co.'s short-term financial health.
4. Prepare adjusting journal entries for:
   • Depreciation expense: $5,000
   • Rent expense: $1,400
5. Explain why adjusting entries are necessary for accurate financial reporting.