Exhibit 8.26 presents the separate financial statements at December 31, 2018, of Prestige Resorts and its 80%-owned subsidiary Booking, Inc. Two years earlier on January 1, 2017, Prestige acquired 80% of the common shares of Booking for $1,170 million in cash. Booking’s 2017 net income was $105 million, and Booking paid no dividends in 2017. Booking’s 2018 income was $135 million, and it paid $75 million in dividends on common stock during 2018. Booking’s pre- and postacquisition stock prices do not support the existence of a control premium. Exhibit 8.27 shows the allocation of fair value at the date of acquisition, January 1, 2017. Exhibit 8.28 traces Prestige Resorts’ equity method accounting for Booking, Inc. Ignore deferred tax effects.

REQUIRED

a. Complete Exhibit 8.27 to show income effects and balance sheet adjustments to be reflected in the December 31, 2018, Eliminations column of the consolidated worksheet.

b. Complete Exhibit 8.28 to trace the noncontrolling interests in Booking, Inc.’s earnings and net assets.

c. Prepare a worksheet to consolidate Prestige and Booking at December 31, 2018.

Exhibit 8.26

Exhibit 8.27

Exhibit 8.28

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Exhibit 8.26 Prestige Resorts and Booking, Inc., Financial Statements at December 31, 2018 (in millions) (Problem 8.23) Prestige Resorts Booking, Inc. Revenues $(1,365) $ (645) Cost of goods sold Depreciation expense Amortization expense 516 300 90 30 150 112.5 Interest expense 105 67.5 Equity in subsidiary earnings Copyright 2018 Cengage Learning. AlIl Rights Reserved. May not be copied, scanned, or duptieated whole or in part. WCN 02-200 Net Income (96) $ (600) $ (135) Cash $ 780 $ 600 Short-term investments 309 67.5 Land 456 442.5 Equipment (net) Investment in Small Technologies 585 240 1,278 Customer lists 1,320 810 Total Assets $ 4,728 $ 2,160 $ (885) (345) Long-term liabilities $(1,623) (1,305) (1,800) $(4,728) Common stock Retained earnings Total Liabilities and Shareholders' Equity (930) $(2,160) Revenues, gains, and net income are in parentheses to indicate that their signs are opposite those of expenses and losses; that is, they are credits for those interpreting the worksheet from the accountant's tra- ditional debit/credit approach. Liabilities and shareholders' equity accounts are in parentheses to indicate that they are daims against assets; again, they are credits in the traditional debit/credit framework.