The following information is taken from the operating section of the statement of cash flows (direct method) of battery builders, inc.:
collections from customers $ 28,000 payments to suppliers for purchases (13,000 ) payments for operating expenses (9,000 ) payments for income taxes (4,000 ) cash provided by operating activities 2,000.
the following information is obtained from the income statement of battery builders:
net income $4,000
depreciation expense 4,000
gain on sale of equipment 2,000
write-off of intangibles 1,000
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 payable (related to operating expense) (2,000)
change in deferred 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).

Daniel owns 100 shares of abc corporation's common stock. abc uses the fair value option, and recent declines in the firm's credit rating have caused the value of the firm's outstanding bonds payable to drop by 10%. daniel feels this is good news, but he wants to know what you think about the situation. which of the following represents your best response? a : "this situation may be positive for you in that the change in abc's credit standing indicates that the value of the firm's assets is likely increasing. however, the drop in bond value may negate any positive effects on your bottom line, because it means your claim on the firm's assets is simultaneously decreasing." b : "actually, this is bad news all around. the drop in the value of abc's bonds payable means shareholders' claims on the firm's assets have decreased. moreover, abc's declining credit rating means that the firm's assets are probably also dropping in value, thus magnifying your losses even more." c : "on the surface, this seems like good news because it means your claim on the firm's assets has increased. however, the drop in creditworthiness may also indicate that abc's assets are declining in value, thus offsetting any gains associated with the drop in bonds payable." d : "you're right! this is good news because it means that abc's debtholders have a decreased claim on the firm's assets. as a result, the firm's existing shareholders"like you"have seen their claim on the firm's assets increase."