The following cash flow information pertains to the 20X1 operations of Matterhorn, Inc., a maker of ski equipment:

Cash collections from customers	$ 16,670
Cash payments to suppliers of inventory	19,428
Cash payments for various operating expenses	7,148
Cash payments for current income taxes	200
Cash provided (used) by operating activities	(10,106)

The following additional information comes from Matterhorn’s 20X1 income statement:

Net income	$ 609
Depreciation of equipment	2,256
Amortization of patents	399
Write-off of obsolete equipment	169

The following additional information comes from Matterhorn’s 20X0 and 20X1 comparative balance sheets (decreases are in parentheses):

Change in accounts receivable	$ 3,630
Change in inventory	3,250
Change in accounts payable	(3,998)
Change in accrued operating expenses	(2,788)
Change in income taxes payable	127

Required:

1. Use the preceding information to derive Matterhorn’s 20X1 income statement.

2. Use the same information to compute Matterhorn’s 20X1 cash flow from operating activities under the indirect method (that is, derive cash flow from operating activities by making the necessary adjustments to net income).

3. Provide a brief explanation for the difference observed between net income and cash provided by operating activities.