(This exercise is based on the situation described in E 16–21, modified to include a carryforward in addition to a carry back.)
Wynn Sheet Metal reported an operating loss of $160,000 for financial reporting and tax purposes in 2013. 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:
2009: Taxable income 60,000 30% tax rate Income taxes Paind 18,000
2010: TI 70,000 30% 21,000
2011: 80,000 40% 32,000
2012: 60,000 45% 27,000
1. Prepare the journal entry to recognize the income tax benefit of the operating loss. Wynn elects the carry back option.
2. Show the lower portion of the 2013 income statement that reports the income tax benefit of the operating loss.