E3.3 (LO 1), AP Carillo Industries collected $108,000 from customers in 2022. Of the amount collected, $25,000 was for services performed in 2021. In addition, Carillo performed services worth $36,000 in 2022, which will not be collected until 2023.

Carillo Industries also paid $72,000 for expenses in 2022. Of the amount paid, $30,000 was for expenses incurred on account in 2021. In addition, Carillo incurred $42,000 of expenses in 2022, which will not be paid until 2023.

Instructions

1. Compute 2022 cash-basis net income.
2. Compute 2022 accrual-basis net income.

Identify the type of adjusting entry needed.