Leasing Inc, provides equipment to distribution companies. On January 1, 2018, Lennie and Send-for-Less enter a three-year contract in which Lennie will supply new equipment with a current market value of $400,000. 

The equipment has an expected economic life of 5 years. Lennie will earn 6% on the lease; Send-for-Less is aware of the 6% rate. Send-for-Less is required to guarantee that the equipment will be worth $80,000 at the end of the three-year lease term-which is equal to the expected fair value in three years. 

The first lease payment is due on January 1, 2018, the first day of the lease, with subsequent payments due on December 31, 2018 and December 31, 2019. Both companies have a December 31 fiscal year end. Show your work to receive credit. 

1. What journal entry does Lennie (Lessor) make on January 1, 2018? 

2. What journal entry(ies) does Lennie make on December 31, 2018?