PQR Inc. presents the following account balances as of July 31, 2025:

• Cash: $22,000
• Accounts Receivable: $12,000
• Supplies: $6,000
• Prepaid Rent: $3,000
• Office Equipment: $37,000
• Accumulated Depreciation: $8,500
• Accounts Payable: $15,000
• Wages Payable: $4,000
• Long-Term Notes Payable: $12,000
• Common Stock: $28,000
• Retained Earnings: $24,500

Requirements:

1. Prepare a classified balance sheet.
2. Compute the current ratio and acid-test ratio.
3. Assess the liquidity position of PQR Inc.
4. Record the adjusting entries for:
   • Depreciation expense: $4,250
   • Supplies expense: $3,000
5. Discuss the role and importance of adjusting entries in accounting.