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Wiley Company's income statement for Year 2 follows: Sales Cost of goods sold $ 2,600 1,200 Gross margin 1,400 Selling and administrative expenses 300
Wiley Company's income statement for Year 2 follows: Sales Cost of goods sold $ 2,600 1,200 Gross margin 1,400 Selling and administrative expenses 300 Income before taxes Income taxes Net income 1,100 440 $ 660 The company's selling and administrative expense for Year 2 includes $80 of depreciation expense. Selected balance sheet account for Wiley at the end of Years 1 and 2 are as follows: Current Assets Accounts receivable Inventory Prepaid expenses Year 2 Year 1 $190 $255 $164 $188 $ 36 $ 23 $121 $ 70 Income taxes payable $ 11 $108 $ 22 $ 80 Current Liabilities Accounts payable Accrued liabilities 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 $5,000 loss on the sale of equipment. Would these transactions affect the computation in (1) above?
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