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give answer in 2 step with explanation at the end of each step and final answer at the end:Wynn Farms reported a net operating loss of $265,000 for financial reporting and tax purposes in 2024. The enacted tax rate is 25%. Taxable income, tax rates, and income taxes paid in Wynn's first four years of operation were as follows: Taxable Income Taxes Income Tax Rates Paid 2020 $ 81,000 30% $24,300 2021 91000 30 27,300 2022 185,000 a 74,000 2023 40,000 s 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 2024 income statement that reports the income tax benefit of the net operating loss. Complete this question by entering your answers in the tabs below. iired 1 " Required 1 poquied 1) Reauired 2 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 following table to recognize the income tax benefit of the net operating loss. Note: Enter your answers in whole dollars. Leave no cell blank, enter "0" wherever applicable. Enter all amounts as positive values. Show lesa [Ter SR A— I I ETT SN I I ES I ETT SN I A I I RR FETT SA SN I SN I ER ER

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give answer in 2 step with explanation at the end of each step and final answer at the end:Uploaded ImageWynn Farms reported a net operating loss of $265,000 for financial reporting and tax purposes in 2024. The enacted tax rate is 25%. Taxable income, tax rates, and income taxes paid in Wynn's first four years of operation were as follows: Taxable Income Taxes Income Tax Rates Paid 2020 $ 81,000 30% $24,300 2021 91000 30 27,300 2022 185,000 a 74,000 2023 40,000 s 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 2024 income statement that reports the income tax benefit of the net operating loss. Complete this question by entering your answers in the tabs below. iired 1 " Required 1 poquied 1) Reauired 2 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 following table to recognize the income tax benefit of the net operating loss. Note: Enter your answers in whole dollars. Leave no cell blank, enter "0" wherever applicable. Enter all amounts as positive values. Show lesa [Ter SR A— I I ETT SN I I ES I ETT SN I A I I RR FETT SA SN I SN I ER ER

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Asked by: Aman Kori
Created at: 2025-10-16 07:48:10

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Let's break down the solution into **2 steps** as requested: --- ## **Step 1: Allocate Net Loss (NOL) CarrybackWynn Farms has a **net operating loss (NOL) of $265,000 in 2024**. Since NOL carrybacks are allowed, we use the NOL to offset the taxable income from the previous years in the following order: 2023, 2022, 2021, and 202. Taxable income available to offset: - **2023:** $40,000 (tax rate 45%) - **2022:** $185,000 (tax rate 40%) - **2021:** $91,000 (tax rate 30%) - **202:** $81,000 (tax rate 30%) **Apply NOL to earlier years first:** - Offset 2023 income: $40,000 - Remaining NOL: $265,000 - $40,000 = $225,000 - Offset 2022 income: $185,000 - Remaining NOL: $225,000 - $185,000 = $40,000 - Offset 2021 income: $40,000 - Remaining NOL: $40,000 - $40,000 = $ No NOL left to carry back to 202. **Explanation:** We use the NOL to offset the earliest years first (latest to earliest), stopping when the loss is used up. --- ### **Step 1 Table Calculation** | Operating loss carryback | Rate % | Tax $ | Recorded as | |-------------------------|--------|---------------|------------------------------| | Carried back - 2023 | 45% | $40,000 × 45% = $18,000 | Income tax receivable | | Carried back - 2022 | 40% | $185,000 × 40% = $74,000 | Income tax receivable | | Carried back - 2021 | 30% | $40,000 × 30% = $12,000 | Income tax receivable | | Carried back - 202 | 30% | $ × 30% = $ | Income tax receivable | --- ## **Step 2: Calculate Total Tax Benefit and Prepare Journal Entry** **Total tax benefit** = $18,000 (2023) + $74,000 (2022) + $12,000 (2021) = **$104,000** **Journal Entry to recognize the tax benefit:** - **Debit:** Income tax receivable $104,000 - **Credit:** Income tax benefit (NOL carryback) $104,000 **Explanation:** This recognizes the expected refund from the IRS due to carrying back NOL to prior years. --- ## **Final Answer** ### **Step 1 Table (Completed)** | Operating loss carryback | Rate % | Tax $ | Recorded as | |-------------------------|--------|------------|-----------------------| | Carried back - 202 | 30% | $ | Income tax receivable | | Carried back - 2021 | 30% | $12,000 | Income tax receivable | | Carried back - 2022 | 40% | $74,000 | Income tax receivable | | Carried back - 2023 | 45% | $18,000 | Income tax receivable | ### **Step 2 Journal Entry** ```markdown Income tax receivable $104,000 Income tax benefit (NOL) $104,000 ``` **Total income tax benefit of the NOL carryback is $104,000.**

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