Final answer:
On the consolidated balance sheet, the land sold by the parent company to its subsidiary should be shown at the historical cost of $35,000. This value is based on deducting the $5,000 gain from the $40,000 sale price.
Step-by-step explanation:
When a parent sells land to its subsidiary, and a gain is realized on the transaction, the gain is eliminated upon consolidation because intercompany transactions must be removed when preparing the consolidated financial statements. Thus, the land would be reported at the original cost to the parent company before the sale. Since the parent company reported a gain of $5,000, this implies that the original cost of the land was $40,000 (sale price) minus $5,000 (gain), resulting in $35,000. Therefore, on the consolidated balance sheet, the land should be shown at the historical cost of $35,000, which was its value before the parent realized a gain on the sale to the subsidiary.