On December 31 of Year 1, the company, a lessor, sold some machinery that it had been leasing under a direct financing lease arrangement. On January 1 of Year 1 (after receipt of the lease payment for the year), the following account balances were associated with the lease:
Gross Lease Payments Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . $234,000
Unearned Interest Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Present Value of Lease Payments Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $194,000
The interest rate implicit in the lease is 10%. The leased machinery is sold for $130,000 cash. Make the journal entry or entries necessary on the books of the lessor to record this sale.