On January 1, 2018, Lessee Corp and Lessor Company enter into a sale-leaseback agreement whereby Lessee is going to sell a milling machine to Lessor for $30,000 and then lease it back from them for a 3 year period. The machine had a carrying value on Lessee's books of $15,000 (original cost was $25,000). Other information is as follows:

1. The sale date will be January 1, 2018. The first payment is made at that time.
2. The non-callable lease term will be 3 years and require annual payments of $10,395.
3. The estimated remaining useful life of the machine is 3 years.
4. The annual rent payments provide Lessor with a 4% rate of return on the financing arrangement.

Required: Prepare the necessary journal entries that would be made in 2018 (1/1/18 and 12/31/18) by the Lessee. Assume that all cash flows occur on 1/1. (Note: You do not need an amortization schedule. Only provide the journal entries for the two dates for the Lessee only.)