Lang Company has not yet prepared a formal statement of cash flows for 2017. Following are comparative balance sheets as of December 31, 2017 and 2016, and a statement of income and retained earnings for the year ended December 31, 2017:

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 2017 using the direct method in the Operating Activities section.

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Balance Sheet December 31 (thousands omitted) Assets 2017 2016 Current assets: Cash U.S. Treasury bills (six-month) Accounts receivable $ 60 $ 100 610 Total cument assets $1,390 $1,250 Long-term assets: $ 70 Buildings and equipment Accumulated depreciation Patents (less amortization) Total long-term assets $ 80 710 (180) 105 $ 715 $2,105 (120) 130 $ 680 $1,930 Total assets Liabilities and Owners' Equity Current liabilities Accounts payable Taxes payable Notes payable $ 360 $ 300 Total curent liabilities $ 785 720 Tem notes payable due 2021 920 Total liabilities Owners' equity $ 985 $ 700 310 $1,010 $1,930 Common stock outstanding Retained earnings $ 830 Total owners' equity $1,120 $2,105 Total liabilities and owners' equity Lang Company Statement of Income and Retained Earnings For the Year Ended December 31, 2017 (thousands omitted) Sales Less expenses and interest: $2,408 Cost of goods sold Salaries and benefits Heat, light, and power Depreciation Property taxes Patent amortization Miscellaneous expense Interest $1,100 850 75 60 25 2,193 215 105 S 110 310 $ 420 130 $ 290 Net income before income taxes Income taxes Net income Retained eamings January 1, 2017 Stock dividend distributed Retained eamings-December 31, 2017