The following cash flow information pertains to the 2017 operations of Matterhorn, Inc., a maker of ski equipment:

Cash collections from customers.................................$ 16,670

Cash payments to suppliers..........................................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 2017 income statement:

Net income.........................................................$ 609

Depreciation of equipment.......................................2,256

Amortization of patents.............................................399

Loss on sale of equipment..........................................169

The following additional information comes from Matterhorn's 2016 and 2017 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 deferred tax liability....................................127

Required:

1. Use the preceding information to derive Matterhorn's 2017 income statement.

2. Use the same information to compute Matterhorn's 2017 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.