RST Company has provided these figures:

• Cash: $25,000
• Accounts Receivable: $35,000
• Inventory: $40,000
• Prepaid Insurance: $2,500
• Accounts Payable: $15,000
• Short-term Loans: $20,000
• Machinery: $150,000
• Accumulated Depreciation: $30,000
• Common Stock: $80,000
• Retained Earnings: $67,500

Requirements:

1. Create a classified balance sheet.
2. Compute the current and quick ratios.
3. Journalize the following adjustments:
   • Depreciation expense: $4,000
   • Insurance expense: $500
4. Determine the equity section of the balance sheet.
5. Discuss the impact of short-term loans on liquidity.