Wiley Company's income statement for Year 2 follows: Sales Cost of goods sold Gross margin Selling and administrative expenses Income before taxes Income taxes Net income $ 2,050 1,100 950 500 450 180 $ 270 The company's selling and administrative expense for Year 2 includes $74 of depreciation expense. Selected balance sheet accounts for Wiley at the end of Years 1 and 2 are as follows: Year 2 Year 1 $195 $158 $ 40 Current Assets Accounts receivable Inventory Prepaid expenses Current Liabilities Accounts payable Accrued liabilities Income taxes payable $240 $180 $ 24 $124 $ 13 $120 $ 70 $ 25 $ 75 Required: 1. Using the direct method, convert the company's Income statement to a cash basis? 2. Assume that during Year 2 Wiley had a $12,000 gain on sale of Investments and a $7,000 loss on the sale of equipment. Would these transactions affect the computation in (1) above? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Using the direct method, convert the company's income statement to a cash basis? (Adjustment amounts that are to be deducted should be indicated with a minus sign.) Wiley Company Direct Method of Determining the Net Cash Flows from Operating Activities Sales $ 2,050 Adjustments to a cash basis: Decrease in accounts receivable 2,050 Cost of goods sold 1,100 Adjustments to a cash basis: Decrease in inventory Increase in accounts payable 1,100 Selling and administrative expenses Adjustments to a cash basis: Depreciation Increase in prepaid expenses Decrease in accrued liabilities 0 Income taxes Adjustments to a cash basis: Increase in income taxes payable 0 S 950 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Assume that during Year 2 Wiley had a $12,000 gain on sale of investments and a $7,000 loss on the sale of equipment. Would these transactions affect the computation in (1) above? ONo, gains and losses on income statement are ignored under direct method. No, gains and losses on income statement are considered under direct method. OYes, gains and losses on income statement are ignored under direct method. Yes, gains and losses on income statement are considered under direct method.