Five years ago, Tobey’s Well Being Inc. recognized an ROU asset for $50,000. Today, on January 1, 2019, Tobey exercised its option to purchase the equipment for $10,000. This ROU asset has been depreciated over its economic life of eight years on a straight-line basis. At the commencement date of the lease, the option to purchase was determined to represent a bargain purchase and the expected residual value of the asset at the end of its useful life was $0.

Required:

Prepare the journal entries to derecognize the ROU asset and lease liability on January 1, 2019.