Smithfield Farms purchased a combine from John Deere for $175,000 on January 2, 2014. Smithfield paid $25,000 in cash and signed an installment note calling for five annual payments of $39,569.58 beginning on December 31, 2014. Deere based the payments on a 10% rate of interest. Smithfield made the first payment, but a failed harvest in 2015 left it unable to make the upcoming payment. Deere agreed to repossess the combine, which had a market value of $132,000 on December 31, 2015, and cancel the note. Deere accrued interest on the loan for 2015 prior to canceling the note.

Required:
Prepare the journal entry John Deere would make on December 31, 2015, to record the settlement.