Lang Company has not yet prepared a formal statement of cash flows for 2012. Following are comparative balance sheets as of December 31, 2012 and 2011, and a statement of income and retained earnings for the year ended December 31, 2012:

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 2012 using the direct method in the Operating Activities section

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Lang Company Statement of Income and Retained Earnings For the Year Ended December 31, 2012 (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 18 25 10 2,193 215 105 $ 110 310 S 420 130 S 290 Net income before income taxes Income taxes Net income etained eamings-January 1, 2012 Stock dividend distributed Retained eamings-December 31, 2012