Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Wynn Farms reported a net operating loss of $225,000 for financial reporting and tax purposes in 2021. The enacted tax rate is 25% Taxable income

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Wynn Farms reported a net operating loss of $225,000 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: 2017 2018 2019 2020 Taxable Income $ 73,000 83,000 145,000 40,000 Tax Rates 30% 30 40 45 Income Taxes Paid $ 21,900 24,900 58,000 18,000 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. 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.) Tax $ Recorded as: S 0 Rate % 30% 30% X S 0 0 X s 0 > > 145 X X $ Operating loss carryback Carned back - 2017 Carried back-2018 Carried back-2019 Camed back 2020 Total carryback Operating loss carryforward Carried forward 300 58 40% 45% 40 X X $ 18 76 $ Receivable income tax refund $ 40 X X 25% 10 Deferred tax asset-ending 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.) No Event General Journal Debit Credit Receivable-Income tax refund Income tax expense 1 1 Calculation Show the lower portion of the 2021 income statement that reports the income tax benefit of the net operating loss. (Amou to be deducted should be indicated with a minus sign. Enter your answers in whole dollars.) Income tax benefit 0 0 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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing And Assurance Services

Authors: Alvin Arens, Randal Elder, Mark Beasley

14th Edition

1256560812, 9781256560814

More Books

Students also viewed these Accounting questions