Soaring Pieces Inc. creates aluminum alloy parts for commercial aircraft. In a recent transaction Soaring leased a high precision lathe machine from Rapid Revolving Corp. on January 1, 2019.

The following information pertains to the leased asset and the lease agreement:

Cost of lathe to lessor	$140,000
Rapid's normal selling price for lathe (FMV)	$178,268
Useful life	7 years
Lease provisions
Lease term	5 years
Payment amount	$40,000
Payment frequency	Annual
Payment timing	December 31
Estimated residual value at end of lease (unguaranteed)	$20,000
Interest rate implicit in the lease (readily determinable by lessee)	7%
Lessee's incremental borrowing rate	8%

The lathe machine will revert back to the lessor at end of lease term, title does not transfer to lessee at any time, and there is not a bargain purchase option.

Both parties report under IFRS.

1. Prepare the journal entries on January 1, 2019 and December 31, 2019 for the lessor, Rapid Revolving Corp