(Classifying transactions and economic events, LO 8) Classify the following transactions and economic events that Floral Ltd. (Floral) was involved with as commitments, subsequent events, or contingencies. Some may fit more than one classification. Assume that the year end is December 31, 2007. Indicate how each should be reflected in the financial statements and explain your reasoning. In responding, consider the usefulness of the information to different users of the financial statements.

a. On January 15, 2008 Floral signed a three-year contract with a supplier to provide raw materials. The contract is the largest ever agreed to by Floral.

b. In November 2007 a company that Floral was suing for damages for breaching a contract made an offer of $200,000 to settle the case. As of the year end Floral had not decided whether to accept the offer or go to court. The offer is far below what Floral is suing for.

c. On January 21, 2008 Floral signed a five-year lease for storage space in a building near its main facility. The annual lease payments will be $5,000 per year.

d. On January 18 the company lost a lawsuit launched by a disgruntled former senior executive. Floral is required to pay the former employee $500,000 in damages.

e. In May 2007 Floral guaranteed a $1,000,000 bank loan made to a company Floral owns. Floral is responsible for paying the principal and any outstanding interest in the event that the company is unable to make its payments.