Retained earnings adjustment

On 1/1/2004, Badger entered into a lease agreement to lease an item of machinery for 4 yrs with rentals of $210,000 payable annually in arrears. The asset has a useful life of 5 yrs and at the end of the lease term, legal ownership will pass to Badger. The present value of the lease payments at the inception of the lease was $ 635,000 and the interest rate implicit in the lease is 12.2%. For the yr ended 31/12/2004. Badger accounted for this lease by recording the payment by recording the payment of $210,000 as an opening expense. This treatment was discovered during 2005, after the financial startment for the 2004 had been finalised.

In the SOCE for 2005, what adjustment will be necessary to RE b/f.

Solutions:
Reversed incorrect treatment
Debit liability 210,000 and credit RE
Dep 127,000 ( 635,000/5)
Debit RE 127,000 credit PPE 127,000
Finance cost $ 77470 ( 635000/12.2%)
debit RE 77470 and credit Liability 77470
Net income = 5530.

I understand perfectly the solutions but;

The only thing I need your explanation is;
What liability account are we debiting with $210,000 ? before crediting the RE with $210,000. knowing that the operating expense acct debited was not stated here. We know that a debit in expense acct is an increase to that account.