Question

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 $ 2,450 1,400 1,050 400 650 260 $ 390 The company's selling and administrative expense for Year 2 includes $76 of depreciation expense. Selected balance sheet accounts for Wiley at the end of Years 1 and 2 are as follows: Year 2 Year 1 $215 $164 $ 39 $ 235 $194 $ 22 Current Assets Accounts receivable Inventory Prepaid expenses Current Liabilities Accounts payable Accrued liabilities Income taxes payable $126 $ 13 $126 $ 77 $ 25 $ 85

Answer 1

Req 1
	Sales				2,450
	Adjustment to a cash basis
	decrease in accounts receivable				20	2,470
	cost of goods sold				1400
	Adjustment to a cash basis
	less:decrease in inventory				-30
	less:increase in accounts payable				-49	1479
	Selling and administrative expense				400
	Adjustment to a cash basis
	less:Depreciation expense				-76
	add:increase in prepaid expense				17
	Add:Decrease in accrued liabilities				12	353
	income tax expenses				260
	Adjustment to a cash basis
	less:increase in income taxes payable				-41	219
	net cash provided by operating activities					419
REQ 2	No,gains and losses on income statement are ignored under direct method