P3-68B. (Learning Objective 1: Linking accrual accounting and cash flows) Garage Corporation earned revenues of €38 million during 20X6 and ended the year with net income of

€4 million. During 20X6, Garage collected cash of €27 million from customers and paid cash for all of its expenses plus an additional €1 million on account for amounts payable at December 31, 20X5. Answer the following questions about Garage’s operating results, financial position, and cash flows during 20X6.

Requirements 1. How much were Garage’s total expenses? Show your analysis.

2. Identify all the items that Garage will report on its 20X6 Income Statement. Show each amount.

3. Garage began 20X6 with receivables of €9 million. All sales are on account. What was Garage’s receivables balance at the end of 20X6? Identify the appropriate financial statement and show how Garage will report its ending receivables balance in its 20X6 annual report.

4. Garage began 20X6 owing accounts payable of €10 million. All expenses are incurred on account. During 20X6, Garage paid €28 million on account. How much in accounts payable did Garage owe at the end of 20X6? Identify the appropriate financial statement and show how Garage will report accounts payable in its 20X6 annual report.