On 1 August 2010 Sunshine Ltd entered into an agreement to lease a machine that had an estimated life of 10 years. The lease period is for four years with annual rentals of $6,000 payable in advance from 1 August 2010. The machine is expected to have a nil residual value at the end of its life. The machine had a fair value of $60,000 at the inception of the lease. How should the lease be accounted for in the financial statements of Sunshine Ltd for the year end April 31, 2011? Show all workings (10 marks)