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 $ 2,900 1,400 1,500 300 1,200 480 $ 720 The company's selling and administrative expense for Year 2 includes $78 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 $205 $235 Inventory $160 $194 Prepaid expenses $ 36 $ 29 Current Liabilities Accounts payable $120 $ 82 Accrued liabilities $ 13 $ 25 Income taxes payable $114 $ 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 $13,000 gain on sale of investments and a $7,000 loss on the sale of equipment. Would these transactions affect the computation in (1) above?