**Educational Website Transcription and Explanation**---**Scenario:**Wynn Farms reported a net operating loss of $160,000 for both financial reporting and tax purposes in 2021. The enacted tax rate is 25%. Taxable income, tax rates, and income taxes paid by Wynn in the first four years of operation are detailed below:**Income Tax Table:**| Year | Taxable Income | Tax Rates | Income Taxes Paid ||------|----------------|-----------|------------------|| 2017 | $60,000 | 15% | $9,000 || 2018 | $70,000 | 15% | $10,500 || 2019 | $80,000 | 25% | $20,000 || 2020 | $60,000 | 30% | $18,000 |---**Requirements:**1. NOL (Net Operating Loss) carrybacks are generally not permitted for most businesses except for property and casualty insurance companies, as well as certain farm-related businesses. Assume Wynn Farms qualifies as one of these businesses. Complete the table below to recognize the income tax benefit of the net operating loss.2. Show the lower portion of the 2021 income statement that reports the income tax benefit of the net operating loss.**Interactive Exercise Prompt:**- The answer is not yet complete. To complete the question, enter your answers in the tabs below.**Detailed Instruction:**- Enter your answers in whole dollars. Leave no cell blank; enter "0" wherever applicable, and ensure all amounts are entered as positive values.---**Interactive Table: Net Operating Loss Carryback and Carryforward**| Net Operating Loss Carryback | Rate % | Tax $ | Recorded as: ||------------------------------|--------|-------|--------------|| Carried back - 2017 | $60,000| 15% | $9,000 || Carried back - 2018 | $70,000| 15% | $10,500 || Carried back - 2019 | $80,000| 25% | $20,000 || Carried back - 2020 | $60,000| 30% | $18,000 || **Total carryback** | | | $57, ### Income Tax Benefit Statement for 2021#### Instructions: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.)**#### Income Statement Details:- **Operating Loss Before Income Taxes:** - $160,000 (deducted with a minus sign): $-\$160,000$- **Income Tax Benefit:** - Part 1: $38,000 - Part 2: $5,000 - Part 3: $43,000 (sum of Part 1 and Part 2) - Final Income Tax Benefit: $-\$117,000$ (net operating loss benefit)These figures illustrate the calculated income tax benefit related to the operating loss for the year 2021. The operating loss of $160,000 leads to an income tax benefit of $117,000.

Net Operating Losses (NOL): As per IRS, the net operating losses are the excess of tax-deductible…

Wynn Farms reported a net operating loss of $160,000 for financial reporting and tax purposes in 2021. The enacted ax 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 2017 $60,000 15% 2018 70,000 15 2019 80,000 25 2020 60,000 30 Income Taxes Paid $ 9,000 10,500 20,000 18,000 Required: 1. 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. Complete the table given below to recognize the income tax benefit of the net operating loss. 2. Show the lower portion of the 2021 income statement that reports the income tax benefit of the net operating loss. X Answer is not complete. Complete this question by entering your answers in the tabs below. Required Required Required 1 GJ 1 2 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. Complete the following table to recognize the income tax benefit of the net operating loss. (Enter your answers in whole dollars. Leave no cell blank, enter "0" wherever applicable. Enter all amounts as positive values.) Show lessA Net operating loss carryback Rate % Таx $ Recorded as: Carried back - 2017 15%= $9,000 60,000 70,000X x 80,000x 60,000 Carried back - 2018 15% 25% 30% 10,500 20,000 | 18,000 Carried back - 2019 Carried back - 2020 %3D Total carryback 57,500

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q