Homework SourseWynn Sheet Metal reported an operating loss of 202000 for fi
Wynn Sheet Metal reported an operating loss of $202,000 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:
Complete the following table given below and prepare the journal entry to recognize the income tax benefit of the 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. Leave no cell blank, enter \"0\" wherever applicable.)
Show the lower portion of the 2016 income statement that reports the income tax benefit of the operating loss. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands.)
| Wynn Sheet Metal reported an operating loss of $202,000 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: |
Solution
All the Amounts are in thousands 1 prepare the journal entry to recognize the income tax benefit of the operating loss. Wynn elects the carryback option Event General Journal debit Credit 1 Income tax refund (Receivable) A/c $76.85 Deffered tax Asset A/c $8.4 To Income tax benefit on net operating Loss $85.25 (being Income tax benefit on net operating Loss has been reconised ) Workings Prior years Current year Furture Deductable Amount particulars 2014 2015 2016 Operating Loss ($202) Loss carry back $101 $81000 $181 Loss carryforword ($21) $21 Tax Rate Applied on Amount $101 $81 $21 tax rate 40% 45% 40% 40% tax payable / (Refundable) ($40.40) ($36.45) Deffered tax asset $8.4 Total refund =$40.4+$36.45 =$76.85 Total Deffered Tax asset =$8.40 2 Show the lower portion of the 2016 income statement that reports the income tax benefit of the operating loss Amounts in Thousands Operating Loss Before Income Taxes ($202) income Tax benefit Tax refund from Loss carry back $76.85 Future tax Savings from Loss cary forword $8.4 $85.25 Net Loss ($116.75)
