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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.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.

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
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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