PQR Co. Financial Status as of June 30, 2025:

• Cash: $13,400
• Accounts Receivable: $10,200
• Inventory: $20,000
• Prepaid Rent: $3,500
• Building: $55,000
• Accumulated Depreciation: $9,000
• Accounts Payable: $14,000
• Notes Payable: $8,500
• Common Stock: $28,000
• Retained Earnings: $30,000

Requirements:

1. Construct a classified balance sheet.
2. Compute the debt-to-equity ratio.
3. Assess the solvency of PQR Co.
4. Record the adjusting entries for:
   • Depreciation expense for the year: $3,200
   • Rent expense for the year: $1,800
5. Explain how adjusting entries ensure accurate financial statements.