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	400
Income before taxes	1,100
Income taxes	440
Net income	$ 660

The companys selling and administrative expense for Year 2 includes $82 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	$ 250
Inventory	$ 164	$ 190
Prepaid expenses	$ 35	$ 26
Current Liabilities
Accounts payable	$ 117	$ 76
Accrued liabilities	$ 6	$ 30
Income taxes payable	$ 120	$ 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 $12,000 gain on sale of investments and a $5,000 loss on the sale of equipment. Would these transactions affect the computation in (1) above?