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 $ 2,550 1,500 1,050 300 750 300 $ 450 The company's 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: Current Assets Accounts receivable Inventory Prepaid expenses Current Liabilities Accounts payable Accrued liabilities Income taxes payable Required: Year 2 Year 1 $ 205 $ 255 $ 162 $ 190 $ 36 $ 29 $ 99 $ 77 $ 12 $ 21 $ 116 $ 65 1. Using the direct method, convert the company's income statement to a cash basis. 2. Assume that during Year 2 Wiley had a $11,000 gain on sale of investments and a $4,000 loss on the sale of equipment. Would these transactions affect the computation in (1) above?