Response to the following questions:
1. Is an investment in Treasury bills always classified as a cash equivalent? Explain.
2. Transactions that involve merely purchases or sales of cash equivalents generally are not reported in a statement of cash flows. Describe an exception to this generalization. What is the essential characteristic of the transaction that qualifies as an exception?
3. What are the differences between cash flows from operating activities and the elements of an income statement?
4. Do cash flows from operating activities report all the elements of the income statement on a cash basis? Explain.