In December 2014, Rangers Inc. invested $100,000 of idle cash in U.S. Treasury notes. The notes mature on October 1, 2015, at which time Rangers expects to redeem them at face value of $100,000. The treasurer believes that the notes should be classified as cash equivalents because of the plans to hold them to maturity and receive face value. He also wants to avoid presentation of the purchase as an investing activity because the company made sizable capital expenditures during the year. The treasurer realizes that the decision about classification of the Treasury notes rests with you as controller.

Required
1. According to GAAP, how should the investment in U.S. Treasury notes be classified for purposes of preparing a statement of cash flows for the year ended December 31, 2014? Explain your answer.
2. If the purchase of the notes is classified as an operating rather than an investing activity, is the information provided to outside readers free from bias? Explain.
3. As controller for Rangers, what would you do in this situation? What would you tell the treasurer?