Question
ABC Corp calculated that it had sustained a deferred tax asset of $450,000 in respect of a tax loss and deductible temporary difference of $2.25
ABC Corp calculated that it had sustained a deferred tax asset of $450,000 in respect of a tax loss and deductible temporary difference of $2.25 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 ABCs 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.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started