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  3. wiley companys income statement for year 2 follows

Wiley Companys income statement for Year 2 follows: Sales $ 2,200...

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Accounting

Wiley Companys income statement for Year 2 follows:

Sales $ 2,200
Cost of goods sold 1,100
Gross margin 1,100
Selling and administrative expenses 400
Income before taxes 700
Income taxes 280
Net income $ 420

The companys selling and administrative expense for Year 2 includes $78 of depreciation expense. Selected balance sheet accounts for Wiley at the end of Years 1 and 2 are as follows:

Year 2 Year 1
Current Assets
Accounts receivable $ 210 $ 255
Inventory $ 162 $ 184
Prepaid expenses $ 43 $ 29
Current Liabilities
Accounts payable $ 116 $ 71
Accrued liabilities $ 12 $ 22
Income taxes payable $ 120 $ 75

Required:

1. Using the direct method, convert the companys income statement to a cash basis.

2. Assume that during Year 2 Wiley had a $13,000 gain on sale of investments and a $4,000 loss on the sale of equipment. Would these transactions affect the computation in (1) above?

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