Carillo Industries collected $108,000 from customers in 2017. Of the amount collected, $25,000 was for services performed in 2016. In addition, Carillo performed services worth $36,000 in 2017, which will not be collected until 2018. Carillo Industries also paid $72,000 for expenses in 2017. Of the amount paid, $30,000 was for expenses incurred on account in 2016. In addition, Carillo incurred $42,000 of expenses in 2017, which will not be paid until 2018.
Instructions:
(a) Compute 2017 cash-basis net income.
(b) Compute 2017 accrual-basis net income.

Answer and Explanation:

The computation is shown below;

But before reaching to the final answers, first do the following calculations

Cash collected $108000

AddServices performed in 2017(not collected) $36000

lessServices performed in 2016(collected in 2017) $25000

Revenue for 2017$119,000

Cash paid in 2017$72,000

AddExpense incurred not yet paid for 2017 $42000

Less Expense paid for 2016-$30000

Expense for 2016 $84000

Now

a. Cash basis  

Revenue $108000

Less Expenses -$72,000

Net income $36000

b. Accrual basis  

Revenue for 2017$119,000

Less Expenses for 2017 $84,000

Net income $35,000

750 h and costs $0.60 per bulb.

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