Canada Help with Question

[Marco G]

Hi,

I am currently studying for the financial accounting and reporting CPA foundation exam in Australia and came across a confusing question.

"During the year ended 31 December 20X6, Tin Ltd had cash receipts from customers of $220 000 and sales revenue of $250 000. Irrecoverable debts for the year were $ 10 000. At 31 December 20X6, trade receivables were $70 000.

What amount was shown in the statement of financial position for trade receivables at 1 January 20X6?

1. A $30 000
   
2. B $40 000
   
3. C $50 000
   
4. D $90000"
   

The answer they get is $50,000 however they do not explain how they came to answer. Can someone please give me a detailed explanation.

Also if there would be anyone willing to be like a study partner who I can email questions to that would be a great help.

Thanks

 

[Fidget]

The key thing here is that it's asking for the opening balance as at 01 Jan 20x6. The question tells you what happens during the year ended 31 Dec 20x6, so:

Sales 250,000 less receipts 220,000 less bad debt written off 10,000. That is: 250,000-220,000-10,000 = 20,000. That's the activity "in year". So, if the activity in year equals 20,000, but the balance at the end of the year is 70,000, then the opening balance on 01 Jan 20x6 must've been 50,000.