French Oil Company is a successful efforts company that began operations in 2018. The company owns 100% of the working interest in a proved property that has the following capitalized costs:

A 1/8 royalty on the property is owned by Charles Barton. French sells the working interest for $1,200,000 and retains a production payment interest of $300,000. The production payment interest is payable from the proceeds from 30% of the working interest share of production. The fair market value of the entire original working interest is $1,500,000.

REQUIRED: Prepare the journal entry by French to record the above transaction, assuming that payment of the production payment interest is not reasonably assured.

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Proved Property IDC...... Equipment. Total Accumulated DD&A .... $240,000 600,000 400,000 200,000