Disclosures. In an audit of the Tai Mekong Corporation of Ubon Ratchathani, Thailand, as of 31 December 20X4, it was discovered that the following situations exist. No entries have been made in the accounting records in relation to these items.

1 The Tai Mekong Corporation has guaranteed the payment of interest on the 10-year, first mortgage bonds of NP International, an affiliate. Outstanding bonds of the NP International amount to Baht 3,750,000 with interest payable at 5 per cent per annum, due 1 June and 1 December of each year. The bonds were issued by NP International on 1 December 20X2, and all interest payments have been met by that company with the exception of the payment due 1 December 20X4. The Tai Mekong Corporation states that it will pay the defaulted interest to the bondholders on 15 January 20X5.

2 During the year 20X4, the Tai Mekong Corporation was named as a defendant in a suit for damages by ZAT, Ltd. of Singapore for breach of contract. An adverse decision to the Tai Mekong Corporation was rendered and ZAT, Ltd. was awarded Baht 1,000,000 damages. At the time of the audit, the case was under appeal to a higher court.

3 On 23 December 20X4, the Tai Mekong Corporation declared a common stock dividend of 1,000 shares with a par value of $2,500 per share, payable February 2, 20X5, to the common stockholders of record 30 December 20X4.

Required

A. List the audit procedures you would use to learn about each of the situations above.

B. Describe the nature of the adjusting entries or disclosure, if any, you would make for each of these situations