Aqua Co makes up its accounts to 31 December each year. It enters into a lease (as a lessee) to lease an item of equipment with the following terms:

Inception of lease: 1 January 20X1

Term: Five years: $2,000 paid at commencement of lease, followed by four payments of $2,000 payable at the start of each subsequent year

Fair value: $8,000

Present value of future lease payments: $6,075

Useful life: Eight years

Interest rate implicit in the lease: 12%

Required Show how should this lease should be accounted for in Aqua Co's statement of financial position as at 31 December 20X1