Wynn Farms reported a net operating loss of $100,000 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.

Transcribed Image Text:

Taxable Income Income Taxes Paid Tax Rates $ 9,000 $60,000 2017 15% 2018 70,000 15 10,500 2019 80,000 25 20,000 2020 60,000 30 18,000