Financial statements for Nackawic Inc. follow:

Additional information:
1. Long-term investments were sold for $5,000, resulting in a realized loss of $7,500.
2. New equipment costing $141,000 was purchased for $71,000 cash and a $70,000 bank loan payable.
3. Equipment costing $56,000 was sold for $15,550, resulting in a gain of $8,750.
4. Accounts payable relate to merchandise creditors; accrued liabilities relate to operating expenses.
5. A dividend was paid during the year.
6. Operating expenses include $58,700 of depreciation expense and an $8,750 gain on sale of equipment.
Instructions
(a) Prepare the statement of cash flows, using either (1) the indirect method or (2) the direct method, as assigned by your instructor.
(b) Nackawic's cash position increased by 75 percent between 2011 and 2012. Identify the primary reason(s) for this significant increase.

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NACKAWIC INC. Statement of Financial Position December 31 Long-term investments Property, plant, and equipment Accumulated depreciation Liabilities and Shareholders' Equit Accounts payable 1 Bank loan payable 1 5 Total liabilities and shareholders' equity NACKAWIC INC. Income Statement Year Ended December 31, 2012 Sales Cost of goods sold Gross profit Operating expenses Profit from operations Othe 317,500 99,460 218,040 82,120 135,920 r expenses and losses $12,940 7,500 Interest expense Realized loss on sale of long-term investments Profit before income tax Income tax expense Profit 20,440 115,480 27,670 $ 87,810