Smithfield Farms purchased a combine from John Deere for \($175,000\) on January 2, 2008. Smithfield paid \($25,000\) in cash and signed an installment note calling for five annual pay- ments of \($39,569.58\) beginning on December 31, 2008. Deere based the payments on a 10% rate of interest. Smithfield made the first payment, but a failed harvest in 2009 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, 2009-and cancel the note. Deere accrued interest on the loan for 2009 prior to canceling the note.

Required:
Prepare the journal entry John Deere would make on December 31, 2009 to record the settlement.