Response to the following :
(This question is based on the situation described in problem 1, modified to include a carryforward in addition to a carryback.)
Wynn Sheet Metal reported a net operating loss of $160,000 for financial reporting and tax purposes in 2016. The enacted tax rate is 40%. 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
|
|
2012
|
$60,000
|
30%
|
$18,000
|
|
2013
|
70,000
|
30
|
21,000
|
|
2014
|
80,000
|
40
|
32,000
|
|
2015
|
60.000
|
45
|
27,000
|
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 2016 income statement that reports the income tax benefit of the net operating loss.
Problem 1:
Net operating loss carryback
Wynn Sheet Metal reported a net operating loss of $100,000 for financial reporting and tax purposes in 2016. The enacted tax rate is 40%. 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
|
|
2012
|
$60,000
|
30%
|
$18,000
|
|
2013
|
70,000
|
30
|
21,000
|
|
2014
|
80,000
|
40
|
32,000
|
|
2015
|
60.000
|
45
|
27,000
|
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 2016 income statement that reports the income tax benefit of the net operating loss.