Wiley Company's income statement for Year 2 follows: Sales Cost of goods sold Gross margin $ 2,850 1,200 1,650 Selling and administrative expenses 500 Income before taxes Income taxes Net income 1,150 460 $ 690 The company's 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 $195 $255 Inventory $166 $182 Prepaid expenses $ 42 $ 25 Current Liabilities Accounts payable $119 $ 76 Accrued liabilities $ 9 $ 27 Income taxes payable $122 $ 70 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?