Fore Farms reported a pretax operating loss of $250 million for financial reporting purposes in 2021. Contributing to the loss were (a) a penalty of $14 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2021 and (b) an estimated loss of $10 million from accruing a loss contingency. The loss will be tax deductible when paid in 2022. The enacted tax rate is 25%. There were no temporary differences at the beginning of the year and none originating in 2021 other than those described above.

Required: 1. Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2021. 2. What is the net operating loss reported in 2021 income statement? 3. Prepare the journal entry to record income taxes in 2022 assuming pretax accounting income is $270 million. No additional temporary differences originate in 2022.

Event General Journal Debit Credit No 1 1 Deferred tax asset 59 Income tax expense 59 Is the net operating loss reported in 2022 Inc be entered as 10).) Net operating loss $ 191 million No Event General Journal Credit Debit 67.5 1 1 Income tax expense Income taxes payable Deferred tax asset 59.0 X 8.5