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Wynn Farms reported a net operating loss of $195,000 for financial reporting and tax purposes...

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Accounting

Wynn Farms reported a net operating loss of $195,000 for financial reporting and tax purposes in 2021. The enacted tax rate is 25%. Taxable income, tax rates, and income taxes paid in Wynns first four years of operation were as follows:

Taxable Income Tax Rates Income Taxes Paid
2017 $ 67,000 30 % $ 20,100
2018 77,000 30 23,100
2019 115,000 40 46,000
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. 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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