YZA Inc. Account Balances as of December 31, 2025:

Account	Amount
Cash	$15,000
Accounts Receivable	$11,500
Inventory	$19,000
Prepaid Insurance	$3,000
Equipment	$35,000
Accumulated Depreciation	$9,000
Accounts Payable	$12,000
Notes Payable	$9,500
Common Stock	$32,000
Retained Earnings	$28,500

Requirements:

1. Draft a classified balance sheet.
2. Calculate the current and quick ratios.
3. Evaluate the company's short-term financial stability.
4. Prepare adjusting entries for:
   • Depreciation expense for the year: $3,500
   • Insurance expense for the year: $1,500
5. Discuss the impact of depreciation on net income.