Question

Chapter 16 Exercise/Problem Assignments i Saved Help Save & Exit Submit Check my work 10 Wynn Sheet Metal reported a net operating loss of $132,000 for financial reporting and tax purposes in 2018. The enacted tax rate is 35%. Taxable income, tax rates, and income taxes paid in Wynn's first four years of operation were as follows: 0.9 points 2014 2015 2016 2017 Taxable Income $ 76,000 86,000 96,000 76,000 Tax Rates 25% 25 35 40 Income Taxes Paid $ 19,000 21,500 33,600 30, 400 eBook Hint 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. Print Complete this question by entering your answers in the tabs below. References Required 1 Required 2 Prepare the journal entry to recognize the income tax benefit of the net operating loss. Wynn elects the carryback option. (It required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in thousand: your answers to 1 decimal place.) View transaction list Journal entry worksheet < 1 > Record 2018 income tax benefit from operating loss. Note: Enter debits before credits. Event General Journal Debit Credit

Answer 1

Summary of the information contained in the question :
Operating loss for 2018	$ (132,000)
Tax rate for the year and onwards	35%

• The loss carryback can be allowed for previous two years (i.e. 2016 and 2017 in this case)

• Particular	Year	Operating income	tax rate	tax refund
  first year 2016 shall be considered for tax carry back and then 2017 for remaining loss if any	2016	$    96,000	35%	$ 33,600
  for 2017 only 36000 (132000 - 96000) shall be considered as 96000 is already considered in 2016	2017	$    36,000	40%	$ 14,400
  Loss carry back receivble		$ 132,000		$ 48,000

Ques: 1: jornal

Date	Account title and explanation	DR amt	CR Amr
	Receivables - Income Tax Refund	$ 48,000
	To Income tax benefit - Net Operating Loss		$ 48,000
	(Being income tax benefit due to loss carryback recorded)

Ques: 2:

Particulars	Amount
Operating loss before income tax	$(132,000)
Add:
Income tax benefit - Loss Carryback	$     48,000
Net Loss	$   (84,000)