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Exercise 16-26 (Algo) Net operating loss carryback and carryforward; financial statement effects [LO16-7] Wynn Farms reported a net operating loss of $255,000 for financial reporting
Exercise 16-26 (Algo) Net operating loss carryback and carryforward; financial statement effects [LO16-7]
Wynn Farms reported a net operating loss of $255,000 for financial reporting and tax purposes in 2024. The enacted tax rate is 25%. Taxable income, tax rates, and income taxes paid in Wynns first four years of operation were as follows:
Taxable Income | Tax Rates | Income Taxes Paid | |
---|---|---|---|
2020 | $ 79,000 | 30% | $23,700 |
2021 | 89,000 | 30 | 26,700 |
2022 | 175,000 | 40 | 70,000 |
2023 | 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.
- Show the lower portion of the 2024 income statement that reports the income tax benefit of the net operating loss.
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