Discuss the implication of the current development

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Question - Blegug Corp calculated that it had sustained a deferred tax asset of GBP450,000 in respect  of a tax loss and deductible temporary difference of GBP2.25 million but it had not recognised any such asset in the balance sheet. During the year, a business was injected to the company by the major  shareholder and the company began to derive taxable profit to offset with the loss brought forward.

Required -

1. Discuss the implication of the current development on Blegug's deferred tax asset.

2. Suggest journal entries to effect the implication in (1).

3. If the tax rate is increased to 30%, discuss and suggest journal entries.

Reference no: EM132776381

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