7. Assume a companys beginning and ending balances in the Accumulated Depreciation account are $30,000 and $44,200, respectively. During the period the company sold one noncurrent asset that had an original cost of $8,000. The cash proceeds from the sale were $3,000 and the gain on the sale was $1,000. What is the amount of the depreciation charges that the company would include in the operating activities section of its statement of cash flows?

• $18,200

• $20,200

• $24,200

• $8,200

3. Wiley Companys income statement for Year 2 follows:

Sales	$ 2,550
Cost of goods sold	1,400
Gross margin	1,150
Selling and administrative expenses	400
Income before taxes	750
Income taxes	300
Net income	$ 450

The companys selling and administrative expense for Year 2 includes $80 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	$ 195	$ 235
Inventory	$ 162	$ 186
Prepaid expenses	$ 38	$ 23
Current Liabilities
Accounts payable	$ 129	$ 73
Accrued liabilities	$ 11	$ 26
Income taxes payable	$ 126	$ 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 $15,000 gain on sale of investments and a $4,000 loss on the sale of equipment. Would these transactions affect the computation in (1) above?

Wiley Company Direct Method of Determining the Net Cash flows from Operating activities Net income Adjustments to a cash basis: 0 Adjustments to a cash basis: 0 Selling and administrative expenses Adjustments to a cash basis: 0 Income taxes Adjustments to a cash basis: o $ 0 O No, gains and losses on income statement are ignored under direct method. No, gains and losses on income statement are considered under direct method. Yes, gains and losses on income statement are ignored under direct method. Yes, gains and losses on income statement are considered under direct method