When completing a consolidation working paper, the eliminating entry for a prior year intercompany transfer of land includes a debit to the subsidiary's retained earnings when the transfer is:

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In an upstream sale (subsidiary to parent) where the transfer was made at a gain, the gain recognized by the subsidiary increases its retained earnings. However, for consolidation purposes, this intra-group gain must be eliminated to present the financial statements as if the group is a single entity. Therefore, the eliminating entry includes a debit to the subsidiary's retained earnings to reverse the effect of the gain recognized on the sale of land to the parent.

When Completing a Consolidation Working Paper, the Eliminating Entry for a Prior