Wiley Companys income statement for Year 2 follows: Sales $ 2,200...
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Accounting
Wiley Companys income statement for Year 2 follows:
Sales
$ 2,200
Cost of goods sold
1,100
Gross margin
1,100
Selling and administrative expenses
400
Income before taxes
700
Income taxes
280
Net income
$ 420
The companys 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
$ 210
$ 255
Inventory
$ 162
$ 184
Prepaid expenses
$ 43
$ 29
Current Liabilities
Accounts payable
$ 116
$ 71
Accrued liabilities
$ 12
$ 22
Income taxes payable
$ 120
$ 75
Required:
1. Using the direct method, convert the companys income statement to a cash basis.
2. Assume that during Year 2 Wiley had a $13,000 gain on sale of investments and a $4,000 loss on the sale of equipment. Would these transactions affect the computation in (1) above?
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