Wynn Farms reported a net operating loss of $280,000 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: Taxable Income Tax Rates Income Taxes Paid 2017 $ 84,000 30 % $ 25,200 2018 94,000 30 28,200 2019 200,000 40 80,000 2020 40,000 45 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. Record 2021 income tax benefit from operating loss. 2. Show the lower portion of the 2021 income statement that reports the income tax benefit of the net operating loss.
Wynn Farms reported a net operating loss of $280,000 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:
| Taxable Income |
Tax Rates |
Income Taxes Paid |
|||||||
| 2017 | $ | 84,000 | 30 | % | $ | 25,200 | |||
| 2018 | 94,000 | 30 | 28,200 | ||||||
| 2019 | 200,000 | 40 | 80,000 | ||||||
| 2020 | 40,000 | 45 | 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
Record 2021 income tax benefit from operating loss.
2. Show the lower portion of the 2021 income statement that reports the income tax benefit of the net operating loss.
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