XYZ Corp. Financial Data for the Year Ending June 30, 2024:

• Cash: $18,500
• Accounts Receivable: $12,300
• Inventory: $22,400
• Prepaid Rent: $4,000
• Building: $60,000
• Accumulated Depreciation: $10,000
• Accounts Payable: $15,600
• Notes Payable: $9,500
• Common Stock: $25,000
• Retained Earnings: $40,000

Requirements:

1. Construct a classified balance sheet.
2. Calculate the debt-to-equity ratio.
3. Evaluate the solvency of XYZ Corp.
4. Prepare the adjusting journal entries for:
   • Depreciation expense for the year: $3,000
   • Rent expense for the year: $2,000
5. Explain the role of depreciation in financial statements.