Final answer:
The correct account to credit in the consolidation entry for a sale of land from a parent company to its subsidiary is the Investment in Subsidiary account, offsetting the intercompany transaction on the consolidated financial statements.
Step-by-step explanation:
The question is asking which account would be credited in the elimination entry during the preparation of consolidated financial statements when a parent company sells land to its subsidiary. The correct account to credit would typically be Investment in Subsidiary. This is because the sale of the land from parent to subsidiary does not represent a realized gain on the consolidated financial statements, as the transaction occurs within the economic entity formed by the parent and its subsidiary. Hence, the eliminating entry would debit the Land account to remove the subsidiary's recorded asset, and credit the Investment in Subsidiary account to remove the gain recorded by the parent.
The eliminating entry connected with this land on a working paper prepared to consolidate the financial statements of the parent and subsidiary in 2014 would include a credit to Investment in Subsidiary. This entry is made to eliminate any intercompany transactions between the parent company and its subsidiary, including the land transaction. By crediting the Investment in Subsidiary account, it reduces the value of the subsidiary's equity, creating a balancing entry.