The following is the operating section of the statement of cash flows (direct method) of Battery Builders, Inc.:

Collections from customers	$ 28,000
Payments to suppliers for inventory purchases	(13,000)
Payments for operating expenses	(9,000)
Payments for income taxes	(2,260)
Cash provided by operating activities	3,740

The following information is obtained from the income statement of Battery Builders:

Net income …………………….. $ 6,740

Depreciation expense ……………. 4,000

In addition, the following information is obtained from the comparative balance sheets of Battery Builders (decreases in parentheses):

Change in accounts receivable	$ 3,000
Change in inventory	3,000
Change in accounts payable	2,000
Change in accrued payables (related to operating expense)	(2,000)
Change in income taxes payable	(1,000)

Required:

1. Prepare a complete accrual-basis income statement for the current year.

2. Compute the cash flows from operations using the indirect approach (that is, start with accrual-basis net income and adjust for various items to obtain cash flows from operations).