Wiley Companys income statement for Year 2 follows:

Sales	$ 2,150
Cost of goods sold	1,400
Gross margin	750
Selling and administrative expenses	400
Income before taxes	350
Income taxes	140
Net income	$ 210

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	$ 220	$ 250
Inventory	$ 158	$ 180
Prepaid expenses	$ 43	$ 21
Current Liabilities
Accounts payable	$ 128	$ 83
Accrued liabilities	$ 9	$ 28
Income taxes payable	$ 108	$ 65

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 $6,000 loss on the sale of equipment. Would these transactions affect the computation in (1) above?