Wynn Sheet Metal reported a net operating loss of $108,000 for financial reporti
ID: 341538 • Letter: W
Question
Wynn Sheet Metal reported a net operating loss of $108,000 for financial reporting and tax purposes in 2016. 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 Income Tax Rates Income Taxes Paid 2012 $ 64,000 30 % $ 19,200 2013 74,000 30 22,200 2014 84,000 40 33,600 2015 64,000 45 28,800
Required: 1. Prepare the journal entry to recognize the income tax benefit of the net operating loss. Wynn elects the carryback option. (If no entry is 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.)
2. Show the lower portion of the 2016 income statement that reports the income tax benefit of the net operating loss. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands and round your answers to 1 decimal place.)
Explanation / Answer
1.
Calculate the amount of income tax refund as follows:
Total refundable income tax = $28,800 + $17,600 = $46,400
Prepare the journal entry to record the income tax benefit of the net operating loss as follows:
2.
Lower portion of the 2016 income statement will be prepared as follows:
2016 2015 2014 Net operating loss 108000 Carryback of net operating loss -108000 64000 44000 Income tax rate 45% 40% Income tax refundable 28800 17600Related Questions
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