Wiley Companys income statement for Year 2 follows:

Sales	$	2,700
Cost of goods sold		1,200
Gross margin		1,500
Selling and administrative expenses		500
Income before taxes		1,000
Income taxes		400
Net income	$	600

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		$	240
Inventory	$	162		$	188
Prepaid expenses	$	40		$	22
Current Liabilities
Accounts payable	$	128		$	75
Accrued liabilities	$	7		$	22
Income taxes payable	$	114		$	70

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

Using the direct method, convert the company's income statement to a cash basis. (Adjust deducted should be indicated with a minus sign.) Wiley Company Direct Method of Determining the Net Cash flows from Operating activities Adjustments to a cash basis: Adjustments to a cash basis: Selling and administrative expenses Adjustments to a cash basis: Income taxes Adjustments to a cash basis