Wynn Farms reported a net operating loss of $285,000 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 $ 85,000 30 % $ 25,500 2018 95,000 30 28,500 2019 205,000 40 82,000 2020 40,000 45 18,000 Required: 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. Required 1 Calculation Operating loss carryback Rate % Tax $ Recorded as: Carried back – 2017 ______________ X ______ = _________ Carried back – 2018 ______________ X _______ = __________ Carried back – 2019 ______________ X _______ = __________ Carried back – 2020 ______________ X _______ = __________ Total carryback $ 54,000 _______________________ Operating loss carryforward Carried forward _____________ X _______ = _______________________ Required 1 GJ Prepare the journal entry to recognize the income tax benefit of the net operating loss. (If no entry is required for a transaction/event, select “ No journal entry required” in the first account field. Enter your answers in whole dollars.) Journal entry worksheet Record 2021 income tax benefit from operating loss. Required 2 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 tax benefit: ______________________________________________ _____________________________ __________ _____________________________ __________ _____________________________ __________ ________________0__ _____________________________ $ 0__
Wynn Farms reported a net operating loss of $285,000 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 $ 85,000 30 % $ 25,500
2018 95,000 30 28,500
2019 205,000 40 82,000
2020 40,000 45 18,000
Required:
- 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.
Required 1 Calculation
Operating loss carryback Rate % Tax $ Recorded as:
Carried back – 2017 ______________ X ______ = _________
Carried back – 2018 ______________ X _______ = __________
Carried back – 2019 ______________ X _______ = __________
Carried back – 2020 ______________ X _______ = __________
Total carryback $ 54,000 _______________________
Operating loss carryforward
Carried forward _____________ X _______ = _______________________
Required 1 GJ
Prepare the journal entry to recognize the income tax benefit of the net operating loss. (If no entry is required for a transaction/event, select “ No journal entry required” in the first account field. Enter your answers in whole dollars.)
Journal entry worksheet
- Record 2021 income tax benefit from operating loss.
Required 2
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 tax benefit: ______________________________________________
_____________________________ __________
_____________________________ __________
_____________________________ __________ ________________0__
_____________________________ $ 0__
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