Final answer:
Penno Corporation's net income for 2020 is $160,000, calculated by subtracting total expenses from service revenues. The net cash inflow is $25,000, derived from subtracting cash paid for wages from cash collected. The difference between net income and net cash flow is due to the accounting for credit sales and wages payable.
Step-by-step explanation:
Calculating Net Income and Net Cash Flow
To calculate Penno Corporation's net income for 2020, we need to consider revenues earned and expenses incurred during the year, regardless of when the cash was received or paid. Service revenues are $200,000 (including both cash and credit sales). Total expenses for the year are wages, which add up to $25,000 paid in cash plus $15,000 accrued but not paid, totaling $40,000. Therefore, the net income calculation would be as follows:
Net Income = Service Revenues - Expenses
Net Income = $200,000 - $40,000
Net Income = $160,000
To determine the net cash inflow or outflow, we focus on actual cash transactions. The company collected $50,000 in cash ($30,000 from cash sales and $20,000 from collections on credit sales) and paid out $25,000 for wages. This results in a net cash inflow as follows:
Net Cash Flow = Cash Collected - Cash Paid for Wages
Net Cash Flow = $50,000 - $25,000
Net Cash Flow = $25,000
The difference between net income and net cash flow arises because net income includes all revenues earned and expenses incurred during the period, whereas net cash flow only accounts for actual cash transactions.