Wynn Farms reported a net operating loss of $195,000 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 Income   Tax Rates   Income Taxes Paid 2017 $ 67,000   30 %   $ 20,100   2018   77,000   30       23,100   2019   115,000   40       46,000   2020   40,000   45       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 and prepare the journal entry 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.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Wynn Farms reported a net operating loss of $195,000 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
Income
  Tax
Rates
  Income Taxes
Paid
2017 $ 67,000   30 %   $ 20,100  
2018   77,000   30       23,100  
2019   115,000   40       46,000  
2020   40,000   45       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 and prepare the journal entry 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.

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