HW 4

Wynn Farms reported a net operating loss of $275,000 for financial reporting and tax purposes in 2021. 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
2017	$	83,000		30	%		$	24,900
2018		93,000		30				27,900
2019		195,000		40				78,000
2020		60,000		45				27,000

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.

Complete this question by entering your answers in the tabs below.

• Required 1 Calculation
• Required 1 GJ
• Required 2

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 following table to recognize the income tax benefit of the net operating loss. (Enter your answers in whole dollars. Leave no cell blank, enter "0" wherever applicable. Enter all amounts as positive values.)

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
Operating loss carryforward
Carried forward		x		=

omplete this question by entering your answers in the tabs below.

• Required 1 Calculation
• Required 1 GJ
• Required 2

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.

Note: Enter debits before credits.

Event	General Journal	Debit	Credit
1

Complete this question by entering your answers in the tabs below.

• Required 1 Calculation
• Required 1 GJ
• 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:

choices for boxes

• Income tax expense
• Operating loss before income taxes
• Tax refund from NOL carryback
• Tax savings from NOL carryforward