Reporting a Temporary Difference For the year, Trendy Inc. calculated taxable income of $30,000 after taking into account one temporary difference: prepaid insurance expense on a GAAP basis exceeds prepaid insurance on a tax basis by $5,000. The tax rate is 25% and there were no balances in deferred tax accounts at the beginning of the year. Required a. Indicate the deferred income tax amount that would be recognized on the balance sheet on December 31. Deferred tax asset, ending balance $ 1,250 b. Prepare the income tax section of the income statement for the year and provide the disclosure of current and deferred tax expense. Note: Do not use negative signs with your answers. Partial Income Statement For the Year Ended December 31 Income before income taxes $ 25,000 x Income tax expense 6,250 X Net income $ 18,750 x Financial Statement Disclosure Current tax expense $ 7,500 Deferred tax expense 1,250 Total income tax expense $ 6,250 x