**Instructions:****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.**Task:**Complete this question by entering your answers in the tabs below.**Tabs:**- **Required 1**- **Required 2****Form Field:***Show the lower portion of the 2021 income statement that reports the income tax benefit of the net operating loss. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in whole dollars.)***Diagram:**- A tabulated form is provided with rows and a selection dropdown, indicating areas to fill in the necessary financial information.- The table includes columns for values to be entered for specific accounting calculations relevant to the task.- Navigation buttons "Required 1" and "Required 2" facilitate user interaction for task completion. **Wynn Farms Case Study: Tax Reporting and Journal Entries****Background:**Wynn Farms reported a net operating loss (NOL) of $144,000 for financial reporting and tax purposes in 2021. The enacted tax rate is 25%. Below is the summary of taxable income, tax rates, and income taxes paid in Wynn's first four years of operation:| Year | Taxable Income | Tax Rates (%) | Income Taxes Paid ($) ||------|----------------|---------------|-----------------------|| 2017 | $71,000 | 20 | $14,200 || 2018 | $81,000 | 20 | $16,200 || 2019 | $124,000 | 25 | $31,000 || 2020 | $71,000 | 40 | $28,400 |**Required:**1. **Journal Entry for Income Tax Benefit:** - Prepare a journal entry to recognize the income tax benefit of the net operating loss. NOL carrybacks are not allowed for most companies, except for property and casualty insurance companies and some farm-related businesses. Assume Wynn is one of these businesses.2. **Income Statement Reporting:** - Show the lower portion of the 2021 income statement that reports the income tax benefit of the net operating loss.**Instructions:**Complete the required tasks by entering your answers in the provided tabs.**Required 1:**Prepare the journal entry to recognize the income tax benefit. Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.- **Journal Entry Worksheet:** - Record 2021 income tax benefit from operating loss. - Note: Enter debits before credits.| Event | General Journal | Debit ($) | Credit ($) ||-------|-----------------|-----------|------------|| 1 | | | |After completing your entries, you can record or clear the entry, and view the general journal for review.

Journal entry is the primary step to record the transaction in the books of accounts. The income tax expense is calculated on the taxable income. Income statement records all the income and expenses of the business.Carried back- 2017 0 20% 0 Carried back- 2018 0 20% 0 Carried back- 2019 124000 25% 31000 Carried back- 2020 20000 40% 8000 Total carryback 144000 39000 Income tax benefit Journal Entry: Account Titles and Explanations Debit ($) Credit ($) Receivables- Income tax refund 39000 Income tax benefit- Net operating loss 39000 (To record income tax benefit) Income Statement (Partial) Operating Loss before Income tax -144000 Tax refund from loss carryback 39000 Net Income (Loss) -105000

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Wynn Farms reported a net operating loss of $144,000 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: Taxable Tax Income Rates Income Taxes Paid 20% 2017 $ 71,000 2018 81,000 2019 2020 20 124,000 25 71,000 40 $14,200 16,200 31,000 28,400 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 $144,000 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: Taxable Tax Income Rates Income Taxes Paid 20% 2017 $ 71,000 2018 81,000 2019 2020 20 124,000 25 71,000 40 $14,200 16,200 31,000 28,400 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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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