Leases Bpp kit

Hi sir,

Question

Sugar Co leased a machine from Spice Co. The terms of the lease are as follows:
Inception of lease 1 January 20X1
Lease term 4 years at $78,864 per annum payable in arrears
Present value of future lease payments $250,000
Useful life of asset 4 years
Interest rate: 10 %
Required

(b) Explain, with suitable workings and extracts from the financial statements, how Sugar Co
should account for the lease for the year ended 31 December 20X1. Notes to the accounts are not required.

Answer

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20X1 (EXTRACT)

Non-current liabilities
Lease liabilities (W) 136,886

Current liabilities
Lease liabilities (W) (196,136 – 136,886) 59,250

Working: Lease liability
$
Year ended 31 December 20X1:
1.1.X1 Liability b/d 250,000
1.1.X1 – 31.12.X1 Interest at 10% 25,000
31.12.X1 Instalment in arrears (78,864)
31.12.X1 Liability c/d 196,136

Year ended 31 December 20X2:
1.1.X2 – 31.12.X2 Interest at 10% 19,614
31.12.X2 Instalment in arrears (78,864)
31.12.X2 Liability c/d 136,886

1) I can arrive to this figure 31.12.X1 Liability c/d 196,136 for 1 year , But i dont know what to do the rest of calculations and calculate for second year 31/12/x2
please clarify reasons for calculation second year and rational of the calculations because i didn’t understand them

2) i didn’t understand how to allocate liability between current and non current regarding this question

thanks v much sir