Innis Corp. experienced an accounting and tax loss in 20X5. The benefit of the tax loss was realized in part by carryback. The remainder of the tax loss carryforward of $630,000 was not recognized because management felt that there was considerable doubt as to its eventual recognition.
In 20X6, a further accounting and tax loss was recognized. This time, the tax loss was much smaller, $120,000, and the benefit of the tax loss carryforwards was still not recorded. In 20X7, the company recorded positive accounting earnings. The taxable income prior to using the loss carryforward was $240,000. There were no temporary differences. The tax rate was 35% in 20X7. The tax rate for 20X8 was 40%, enacted in 20X8.

Required:
1. Record 20X7 tax entries, assuming that the likelihood of using the remaining tax loss carryforwards is still not considered to be probable.
2. Assume that in 20X8 accounting and taxable income was $890,000. Record income tax.
3. Record 20X7 tax entries assuming that the probability of using the remaining tax loss carryforwards is considered probable for the first time.
4. Assume that accounting and taxable income in 20X8 was $890,000 but that the entries from requirement 3 were made. Record 20X8 income tax.