Wynn Sheet Metal reported a net operating loss of $120,000 for financial reporting and tax purposes in 2018. The enacted tax rate is 40%. Taxable income, tax rates, and income taxes paid in Wynns 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. Wynn elects the carryback option.

2. Show the lower portion of the 2018 income statement that reports the income tax benefit of the net operating loss.

Taxable Tax Income Taxes Paid $21,000 24,000 36,000 31,500 Income Rates 2014 $70,000 30% 2015 80,000 30 2016 2017 70,000 45 90,000 40