Wynn Farms reported a net operating loss of $116,000 for financial reporting and tax purposes in 2021. The enacted tax rate is 25%. Taxable income, tax rates, and income taxes paid in Wynn’s first four years of operation were as follows: Required: 1. Prepare the journal entry to recognize the income tax benefit of the net operating loss. NOL carrybacks are not allowed for most companies, except for property and casualty insurance companies as well as some farm-related businesses. Assume Wynn is one of those businesses. 2. Show the lower portion of the 2021 income statement that reports the income tax benefit of the net operating loss.
Wynn Farms reported a net operating loss of $116,000 for financial reporting and tax purposes in 2021. The enacted tax rate is 25%. Taxable income, tax rates, and income taxes paid in Wynn’s first four years of operation were as follows: Required: 1. Prepare the journal entry to recognize the income tax benefit of the net operating loss. NOL carrybacks are not allowed for most companies, except for property and casualty insurance companies as well as some farm-related businesses. Assume Wynn is one of those businesses. 2. Show the lower portion of the 2021 income statement that reports the income tax benefit of the net operating loss.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Wynn Farms reported a net operating loss of $116,000 for financial reporting and tax purposes in 2021. The enacted tax rate is 25%. Taxable income, tax rates, and income taxes paid in Wynn’s first four years of operation were as follows:
Required:
1. Prepare the
2. Show the lower portion of the 2021 income statement that reports the income tax benefit of the net operating loss.
Transcribed Image Text:Taxable
Tax
Income
Rates
Income Taxes Paid
2017
$64,000
30%
$19,200
2018
74,000
96,000
64,000
30
22,200
24,000
28,800
2019
25
2020
45
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