Wiley Company’s income statement for Year 2 follows The company’s selling and ad

Question

Wiley Company’s income statement for Year 2 follows

The company’s selling and administrative expense for Year 2 includes $74 of depreciation expense. Selected balance sheet accounts for Wiley at the end of Years 1 and 2 are as follows:

Using the direct method, convert the company’s income statement to a cash basis. (Adjustment amounts that are to be deducted should be indicated with a minus sign.)

I am not sure if I have choosen the correct items in the boxes below. Please help! Anything with a yellow box around it is needed and can be changed.

Sales $ 2,350   Cost of goods sold 1,500   Gross margin 850   Selling and administrative expenses 300   Income before taxes 550   Income taxes 220   Net income $ 330

Explanation / Answer

Sales          2,350 Adjustment to cash Basis Decrease in Accounts receivables                60          2,410 Cost of Goods Sold          1,500 Adjustment to cash Basis Decrease in Inventory             (16) Increase in Accounts Payable             (26)          1,458 Selling & Admn. Exp.             300 Adjustments to Cash basis Increase in Prepaid exp.                12 Decrease in Accrued liabilities                15 Depreciation Charges             (74)             253 Income Tax             220 Adjustments to Cash basis Increase in Income Tax payable             (44)             176 Net Cash Provided by Operating Activities             523

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