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1. Miller Corporation has guaranteed the payment of interest on the 10-year, first mortgage bonds of the Nunu Corp., an affiliate. Outstanding bonds of the Nunu Corp. amount to $2,500,000 with interest payable at 8% per annum, due June 1 and December 1 of each year. Nunu issued the bonds on December 1, 2016, and that company has met all interest payments, with the exception of the payment due December 1, 2018. Miller Corporation states that it will pay the defaulted interest to the bondholders on January 15, 2019. 2. During the year 2018, the Miller Corporation was named as a defendant in a suit for damages by the Draper Inc. for damages for breach of contract. A decision adverse to the Miller Corporation was rendered, and Draper Inc. was awarded $3,000,000 damages. At the time of the audit, the case was under appeal to a higher court. 3. On December 23, 2018, the Miller Corporation declared a common share dividend of 6,000 shares with a stated value of $6,000,000, payable February 2, 2019, to the common shareholders of record on December 30, 2018.In an audit of the Miller Corporation as of December 31, 2018, the following situations exist. No entries have been made in the accounting records in relation to these items. i (Click the icon to view the situations.) Required a. Describe the audit procedures you would use to learn about each of the situations listed. b. Describe the nature of the adjusting entries or disclosure, if any, you would make for each of these situations. (AICPA adapted.) Requirement a. Describe the audit procedures you would use to learn about each of the situations listed. Begin by identifying all of the audit procedures you would use to learn about situation 1. (Select 6 choices that apply.) A. Confirm details of share transactions with registrar and transfer agent. B. Review financial statements of affiliate, and where related party transactions are apparent, make direct inquiries of affiliate management, and perhaps even examine records of affiliate if necessary. C. Review records for unusual journal entries made to the equity accounts (Common share and Retained earnings) subsequent to year-end. OD. Discuss, specifically, any related party transactions with management and include information in the letter of representation. E. Discuss the existence and nature of possible contingent liabilities with management and obtain appropriate written representations. F. Analyse legal expense for the period under audit and review invoices and statements of legal counsel for indications of contingent liabilities. G. Obtain letters from all major attorneys performing legal services for the client as to the status of pending litigation or other contingent liabilities. H. Review current and previous years' revenue agent reports for income tax settlements. [1. Review the minutes of directors' and shareholders' meetings for indication of lawsuits or other contingencies.Identify all of the audit procedures you would use to learn about situation 2. (Select the 4 choices that apply.) A. Review records for unusual journal entries made to the equity accounts (Common shares and Retained earnings) subsequent to year-end. B. Review financial statements of affiliate, and where related party transactions are apparent, make direct inquiries of affiliate management, and perhaps even examine records of affiliate if necessary. OC. Obtain letters from all major attorneys performing legal services for the client as to the status of pending litigation or other contingent liabilities. OD. Confirm details of share transactions with registrar and transfer agent. [)E. Review current and previous years' revenue agent reports for income tax settlements. OF. Analyse legal expense for the period under audit and review invoices and statements of legal counsel for indications of contingent liabilities. [ G. Discuss, specifically, any related party transactions with management and include information in letter of representation. OH. Discuss the existence and nature of possible contingent liabilities with management and obtain appropriate written representations. (1. Review the minutes of directors' and shareholders' meetings for indication of lawsuits or other contingencies. Identify all of the audit procedures you would use to learn about situation 3. (Select the 6 choices that apply.)A. Analyse legal expense for the period under audit and review invoices and statements of legal counsel for indications of contingent liabilities. B. Confirm details of share transactions with registrar and transfer agent. C. Review current and previous years' revenue agent reports for income tax settlements. D. Review the minutes of directors' and shareholders' meetings for indication of lawsuits or other contingencies. E. Review records for unusual journal entries made to the equity accounts (Common shares and Retained earnings) subsequent to year-end. OF. Discuss, specifically, any related party transactions with management and include information in letter of representation. G. Discuss the existence and nature of possible contingent liabilities with management and obtain appropriate written representations. H. Review financial statements of affiliate, and where related party transactions are apparent, make direct inquiries of affiliate management, and perhaps even examine records of affiliate if necessary. 1. Obtain letters from all major attorneys performing legal services for the client as to the status of pending litigation or other contingent liabilities. Requirement b. Describe the nature of the adjusting entries or disclosure, if any, you would make for each of these situations. Begin by selecting the appropriate nature of the adjusting entries or disclosure, if any, needed for each situation. (For situation 1, assume that likelihood that Miller Corporation will need to pay the December 1, 2018 defaulted interest is probable. Assume that in situation 2, the likelihood of Miller having to pay the $3,000,000 damages is reasonably possible.)Situation Financial Statement Treatment W N Now record st, then credits. Exclude explanations from any journal entries. Select "No entry required" on the first line of the Accounts column if an adjusting en No disclosure is necessary Begin by rec Footnote disclosure only is necessary Footnote disclosure along with financial statement account adjustment is necessaryNow record any adjusting entry required by each situation as of December 31, 2018. (Record debits first, then credits. Exclude explanations from any journal entries. Select "No entry required" on the first line of the Accounts column if an adjusting entry is not needed and leave all other cells blank.) Begin by recording any year-end adjusting entry required by situation 1. Journal Entry Date Accounts Debit Credit Dec 31 No entry required Accrued Interest Payable-Nunu bonds Accrued Interest Revenue-Nunu bonds Next, record any Cash Interest Payments for Nunu CorporationNext, record any adjusting entry required by situation 2. Journal Entry Date Accounts Debit Credit Dec 31 Finally, record any year-end adjusting entry required by situation 3. Journal Entry Date Accounts Debit Credit Dec 31