Question

Wynn Sheet Metal reported a net operating loss of $108,000 for financial reporting and tax purposes in 2018. 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 Tax Income Rates 2014 $64,000 3ex 2015 74,000 30 2016 84,800 40 2017 64,000 45 Income Taxes Paid $19, 280 22,200 33,600 28,800 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entry to recognize the income tax benefit of the net operating loss. Wynn elects the carryback option. If no entry required for a transaction/event, select "No journal entry required in the first account field. Enter your answers in thousands and round your answers to 1 decimal place.) View transaction et Journal entry worksheet

Answer 1

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Naming convention is not available, can be slightly different: Solution: As per IRS, NOL can be carried back up to 2 years in a normal scenario: Operating Loss Carryback Carried back - 2014 Carried back - 2015 Carried back - 2016 Carried back - 2017 Total Carryback Operating Loss Carryforward: Carry forward Recorded as: Tax $ Rate $ 30% 0 х 30% $ х 40% $ 84 33.60 х 45% 10.80 24 х $ 44.40 Receivable - Income tax refund Deferred Tax Asset- Ending $ (108-84-24) 40% 0 X Account title and explaination Receivable - Income tax refund Income tax benefit Net operating loss Debit 1) Credit Event 44.40 44.40 Particulars Operating loss before income taxes Income tax benefit: Tax refund from loss carryback 2) Amount $ -108.00 44.40 Net Loss $ -63.60 I