Wiley Companys income statement for Year 2 follows:

Sales	$ 2,350
Cost of goods sold	1,400
Gross margin	950
Selling and administrative expenses	400
Income before taxes	550
Income taxes	220
Net income	$ 330

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	$ 205	$ 255
Inventory	$ 164	$ 194
Prepaid expenses	$ 39	$ 25
Current Liabilities
Accounts payable	$ 112	$ 85
Accrued liabilities	$ 13	$ 28
Income taxes payable	$ 130	$ 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 $5,000 loss on the sale of equipment. Would these transactions affect the computation in (1) above?