E 16 Operating loss carryback and carryforward LO16-7 (This exercise is based on

Question

E 16

Operating loss carryback and carryforward LO16-7 (This exercise is based on the situation described in E 16-21, modified to include a carryforward in addition to a carryback.) Wynn Sheet Metal reported an operating loss of $160,000 for financial reporting and tax purposes in 2013. 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: Required: Prepare the journal entry to recognize the income tax benefit of the operating loss. Wynn elects the carryback option. Show the lower portion of the 2013 income statement that reports the income tax benefit of the operating loss.

Explanation / Answer

Hi,

Please find the answer as follows:

Calculations:

Part A: (From Above Calculations)

Part B: (From Above Calculations)

Thanks.

2013
2014
2015
2016 Depreciable Asset (Net)








Accounting Basis 80 -20 60 -20 40 -20 20 -20 0 Tax Basis 80 -25 55 -33 22 -15 7 -7 0 Temporary Difference

5
18
13
0 Applicable Tax Rate

40%
40%
40%
40% Deferred Tax Liability

2
7
5
0

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