In 2020, Rafting Inc, had pretax GAAP income of \(\$ 100,000\) and the federal statutory tax rate is \(25 \%\). Rafting Inc. has no temporary differences, and so there is no deferred tax component to income tax expense. However, Rafting Inc. has the following permanent difference items.

- Fines paid of \(\$ 30,000\) relating to several environmental laws that were violated. The fines are not

- Interest revenue of \(\$ 20,000\) resulting from an investment in tax-exempt municipal bonds. tax-deductible.

Required

a. Compute the increase to income tax payable and record the income tax expense journal entry,

b. Prepare a reconciliation of the statutory tax rate to the effective tax rate.