In 2019, Compton Inc. incurred a loss of $12,600,000 for tax purposes, when the tax rate was

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In 2019, Compton Inc. incurred a loss of $12,600,000 for tax purposes, when the tax rate was 30%. Because the company had no prior taxable income, it carried the entire loss forward. Considering the size of the loss, Compton management expected to recover only three-quarters of the loss by applying the loss to future income. In 2020, the income tax rate increased from 30% to 32%. 


Required:

Record the 2019 and 2020 journal entries relating to Compton’s tax loss. Use a valuation account for the unrecognized portion of losses carried forward.

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