show all work, thank you.

Wiley Companys income statement for Year 2 follows:

Sales	$	2,850
Cost of goods sold		1,100
Gross margin		1,750
Selling and administrative expenses		300
Income before taxes		1,450
Income taxes		580
Net income	$	870

The companys selling and administrative expense for Year 2 includes $74 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	$240
Inventory	$160	$188
Prepaid expenses	$42	$30
Current Liabilities
Accounts payable	$118	$82
Accrued liabilities	$11	$23
Income taxes payable	$122	$85

Required:
1.	Using the direct method, convert the companys income statement to a cash basis.(Adjustment amounts that are to be deducted should be indicated with a minus sign.)

2.	Assume that during Year 2 Wiley had a $13,000 gain on sale of investments and a $7,000 loss on the sale of equipment. Would these transactions affect the computation in (1) above?
	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. No, gains and losses on income statement are ignored under direct method.