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 $ 2,7ee 1, eee 1,760 400 1,300 520 $ 780 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 $ 195 $ 262 Inventory $ 150 $ 186 Prepaid expenses $ 37 $ 28 Current Liabilities Accounts payable $ 122 $ 77 Accrued liabilities $ 12 $ 27 Income taxes payable $ 120 $ 8e 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 $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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Using the direct method, convert the company income statement to cash basis (Adjustment amounts that are to be deducted should be indicated with a minus sn) Wy Direct Methed Determine the cash Open Adjustments to a cash hasi 0 Adjustments to a cash basis 0 Selling and administrative expenses Adjustments to assis Income taxes Adjustments to a cash basis 0 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 $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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Assume that during Year 2 Wiley had a $11,000 gain on sale of investments and a $4,000 tons on the sale of equipment Would these transactions affect the computation in (1) above. No, gains and losses on income statement are ignored under direct method. ONo, gains and losses on income statement are considered under direct method Yes, gains and losses on income statement are ignored under direct method Yes, gains and losses on income statement are consider er direct method