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Wynn Farms reported a net operating loss of $116,000 for financial reporting and tax purposes...

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Accounting

Wynn Farms reported a net operating loss of $116,000 for financial reporting and tax purposes in 2024. The enacted tax rate is 25%. Taxable income, tax rates, and income taxes paid in Wynns first four years of operation were as follows:

years Taxable Income Tax Rates Income Taxes Paid
2020 $64,000 30% $19,200
2021 74,000 30 22,200
2022 96,000 25 24,000
2023 64,000 45 28,800

Required:

1 Prepare the journal entry to recognize the income tax benefit of the net operating loss. 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.

2 Show the lower portion of the 2024 income statement that reports the income tax benefit of the net operating loss.

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