Lang Company has not yet prepared a formal statement of cash flows for 2014. Following are comparative balance sheets as of December 31, 2014 and 2013, and a statement of income and retained earnings for the year ended December 31, 2014:

Required
1. For purposes of a statement of cash flows, are the U.S. Treasury bills cash equivalents? If not, how should they be classified? Explain your answers.
2. Prepare a statement of cash flows for 2014 using the direct method in the Operating Activities section.

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Lang Company Balance Sheet December 31 (thousands omitted) Assets 2014 2013 Current assets: $ 100 Cash 60 U.S. Treasury bills (six-month) 50 Accounts receivable 610 500 Inventory 720 600 Total current assets $1,390 $1,250 Long-term assets: Land 70 80 Buildings and equipment 710 600 (180) Accumulated depreciation Patents (less amortization) (120) 105 130 $ 715 $ 680 $1,930 Total long-term assets Total assets $2,105 Liabilities and Owners' Equity Current liabilities: $ 360 $ 300 Accounts payable Taxes payable Notes payable 20 25 400 400 $ 785 $ 720 Total current liabilities Term notes payable due 2018 200 200 $ 985 $ 920 Total liabilities Owners' equity: Common stock outstanding Retained earnings Total owners' equity Total liabilities and owners' equity $ 830 $ 700 310 290 $1,120 $1,010 $1,930 $2,105 Lang Company Statement of Income and Retained Earnings For the Year Ended December 31, 2014 (thousands omitted) Sales $2,408 Less expenses and interest: Cost of goods sold Salaries and benefits $1,100 850 Heat, light, and power Depreciation Property taxes 75 60 18 Patent amortization 25 Miscellaneous expense 10 Interest 55 2,193 Net income before income taxes $ 215 Income taxes 105 Net income $ 110 Retained earnings-January 1, 2014 310 $ 420 Stock dividend distributed 130 Retained earnings-December 31, 2014 $ 290