Wiley Companys income statement for Year 2 follows:

Sales	$ 2,850
Cost of goods sold	900
Gross margin	1,950
Selling and administrative expenses	500
Income before taxes	1,450
Income taxes	580
Net income	$ 870

The companys selling and administrative expense for Year 2 includes $72 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	$ 164	$ 188
Prepaid expenses	$ 37	$ 25
Current Liabilities
Accounts payable	$ 114	$ 72
Accrued liabilities	$ 11	$ 22
Income taxes payable	$ 120	$ 85

Required:

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

2. Assume that during Year 2 Wiley had a $14,000 gain on sale of investments and a $5,000 loss on the sale of equipment. Would these transactions affect the computation in (1) above?