Prepare journal entry to recognize the income tax benefit

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Reference no: EM13523177

Wynn Sheet Metal reported an operating loss of $160,000 for financial reporting and tax purposes in 2011. 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 Rate Income Taxes Paid
2007 60,000 30% 18,000
2008 70,000 30% 21,000
2009 80,000 40% 32,000
2010 60,000 45% 27,000

Required:

1. Prepare the journal entry to recognize the income tax benefit of the operating loss. Wynn elects the carryback option.

2.) Show the lower portion of the 2011 income statement that reports the income tax benefits of the operating loss.

Reference no: EM13523177

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