Krawczek Company will enter into a lease agreement with Heavy Equipment Co. where Krawczek will make lease payments over the next five years. The lease is cancelable and requires equal annual payments of $29,600 per year beginning on January 1 of the first year. The last payment will be January 1 of year 5, and Krawczek will continue to use the asset until December 31 of that year. Other important information includes the following:
* The fair value of the equipment is $200,000.
* The applicable discount rate is an 8 percent annual rate.
* The economic life of the asset is 10 years.
* Krawczek does not guarantee the residual value of the asset at the end of the lease, and it does not expect to keep the asset at the end of the term.
* The asset is a standard piece of equipment.
Required:
a. Is the lease an operating lease or a financing lease?
b. What will be the lease expense shown on the income statement at the end of year 1?

6. why the aggregate supply curve slopes upward in the short run in the short run, the quantity of output that firms supply can deviate from the natural level of output if the actual price level in the economy deviates from the expected price level. several theories explain how this might happen. for example, the misperceptions theory asserts that changes in the price level can temporarily mislead firms about what is happening to their output prices. consider a soybean farmer who expects a price level of 100 in the coming year. if the actual price level turns out to be 90, soybean prices will , and if the farmer mistakenly assumes that the price of soybeans declined relative to other prices of goods and services, she will respond by the quantity of soybeans supplied. if other producers in this economy mistake changes in the price level for changes in their relative prices, the unexpected decrease in the price level causes the quantity of output supplied to the natural level of output in the short run.