Exercise 16-25 (Algo) Net operating loss carryback; financial statement effects [LO16-7]

Wynn Farms reported a net operating loss of $176,000 for financial reporting and tax purposes in 2024. The enacted tax rate is 25%. Taxable income, tax rates, and income taxes paid in Wynns first four years of operation were as follows:

	Taxable Income	Tax Rates	Income Taxes Paid
2020	$ 79,000	20%	$ 15,800
2021	89,000	20	17,800
2022	156,000	25	39,000
2023	79,000	40	31,600

Required:

1. Prepare the journal entry to recognize the income tax benefit of the net operating loss. 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.
2. Show the lower portion of the 2024 income statement that reports the income tax benefit of the net operating loss.