Insure Corporation reported a net operating loss of $25 million for financial reporting and tax purposes. Taxable income last year and the previous year, respectively, was $20 million and $15 million. The enacted tax rate each year is 25%. Assume that Insure qualifies as a type of company that is allowed to carry back an NOL to two prior taxable years, using the earliest year first.
Required:
a. Prepare the journal entry to recognize the income tax benefit of the net operating loss.