Reconciling Effective and Statutory Tax Rate In 2020, Rafting Inc. had pretax GAAP income of $200,000 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. Interest revenue of $40,000 resulting from an investment in tax-exempt municipal bonds. Fines paid of $60,000 relating to several environmental laws that were violated. The fines are not tax-deductible. Required a. Record the income tax expense journal entry. Date Account Name Dec. 31, 2020 Income Tax Expense Income Tax Payable Cr. Dr. 55,000 0 07 55,000 b. Prepare a reconciliation of the statutory tax rate to the effective tax rate. Note: Use a negative sign to indicate a decrease. Note: Enter the percent rounded to one digit after the decimal; for example, enter 8.4 for 8.44%, or 8.5 for 8.45%. a. Record the income tax expense journal entry. Dr. Cr. Date Account Name Dec. 31, 2020 Income Tax Expense Income Tax Payable 55,000 0 0 55,000 b. Prepare a reconciliation of the statutory tax rate to the effective tax rate. Note: Use a negative sign to indicate a decrease. Note: Enter the percent rounded to one digit after the decimal; for example, enter 8.4 for 8.44%, or 8.5 for 8.45%. Statutory tax rate Tax-exempt income Non-deductible expense Effective tax rate Percentage 25 % 5% X 7.5 % 27.5% Check