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    Lamb Corporation and Mint Company: Cash Flows

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    In its consolidated cash flow statement for the year ended December 31, 20X2, Lamb Corporation reported operating cash inflows of $284,000, cash outflows of $230,000, and $80,000 for investing and financing activities, respectively, and an ending cash balance of $57,000. Lamb purchased 70 percent of Mint Company's common stock on March 12, 20X1, at book value. Mint reported net income of $30,000, paid dividends of $10,000 in 20X2, and is included in Lamb's consolidated statements. Lamb paid dividends of $45,000 in 20X2. The indirect method is used in computing cash flow from operations.

    a. What was the consolidated cash balance at January 1, 20X2?

    b. What amount was reported as dividends paid in the cash flow from financing activities section of the statement of cash flows?

    c. What adjustment to consolidated net income was made as a result of Lamb's ownership of Mint in deriving cash flow from operations?

    d. If the other adjustments to reconcile consolidated net income and cash provided by operations resulted in an increase of $77,000, what amount was reported as consolidated net income for 20X2?

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    Solution Preview

    a. What was the consolidated cash balance at January 1, 20X2?

    Cash balance = 284,000 - 230,000 - 80,000 + 57,000 + (30,000 - 10,000)*0.70 - 45,000 = 0

    b. What amount was reported as ...

    Solution Summary

    This response calculates the cash balance of Lamb Corporation and Mint Company after Lamb Corporation purchases Mint Company's common stock.