Not seeing the whole book, take what I say with a grain of salt 🙂
Just looking at this example: the underline used for the word at the end of the sentence should be omitted…it’s a blank to be filled in and those are omitted per BF. The underlining within the first sentence is, or course, retained. I would contract everything because it is about the sound. A reader knows that the contraction ar stands for the two letters….if only ONE of the letters was to be circled, that would be different… I would also say that BF addresses words enclosed in shapes (use transcriber-defined typeform indicators). In this instance, I would NOT keep the circle, I would do a TN that says, “In the answer for the first sentence, the letters ar are circled” or maybe “The first sentence is done for you; the letters ar in artist are circled.”
Cindi