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Operating loss carryback and carryforward(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:
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 2013 income statement that reports the income tax benefit of the operating loss.
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