Statement of Cash Flows—Direct Method Lang Company has not yet prepared a formal statement of cash fl ows for 2010. Following are comparative balance sheets as of December 31, 2010 and 2009, and a statement of income and retained earnings for the year ended December 31, 2010:

Lang Company Balance Sheet December 31 (thousands omitted)
Assets 2010 2009 Current assets:
Cash $ 60 $ 100 U.S. Treasury bills (six-month) 0 50 Accounts receivable 610 500 Inventory 720 600 Total current assets $1,390 $1,250 Long-term assets:
Land $ 80 $ 70 Buildings and equipment 710 600 Accumulated depreciation (180) (120)
Patents (less amortization) 105 130 Total long-term assets $ 715 $ 680 Total assets $ 2,105 $1,930 Liabilities and Owners' Equity Current liabilities:
Accounts payable $ 360 $ 300 Taxes payable 25 20 Notes payable 400 400 Total current liabilities $ 785 $ 720 Term notes payable—due 2014 200 200 Total liabilities $ 985 $ 920 Owners’ equity:
Common stock outstanding $ 830 $ 700 Retained earnings 290 310 Total owners’ equity $1,120 $ 1,010 Total liabilities and owners’ equity $2,105 $1,930 Lang Company Statement of Income and Retained Earnings For the Year Ended December 31, 2010 (thousands omitted)
Sales $2,408 Less expenses and interest:
Cost of goods sold $1,100 Salaries and benefi ts 850 Heat, light, and power 75 Depreciation 60 Property taxes 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, 2010 310 $ 420 Stock dividend distributed 130 Retained earnings—December 31, 2010 $ 290.

Required 1. For purposes of a statement of cash fl ows, are the U.S. Treasury bills cash equivalents?
If not, how should they be classifi ed? Explain your answers.
2. Prepare a statement of cash fl ows for 2010 using the direct method in the Operating Activities section.AppendixLO1