QUESTION 2 OrgaBest Bhd is an operator of food and beverages restaurants that sells organic-based meals, snacks and drinks. The company's financial year end is on 31 December every year. One of its specialties is organic fruit juice that is one of the preferred products among the customers. The company obtains a supply of fresh fruits from a local supplier, Fresh Nature Sdn Bhd. To ensure freshness and quality, OrgaBest Bhd has requested the supplier to deliver the fresh fruit daily, early in the morning before the restaurant operates on that particular day. In September 2020, there were about 50 customers who had experienced diarrhea and vomiting due to food poisoning and had been hospitalised for treatment. They claimed that the incident happened after consuming juice served in one of the OrgaBest Bhd's restaurants. Hence, the affected customers collectively took legal action against the company, seeking compensation amounting to RM750,000. However, the company has denied the allegations and claimed that the company did not commit any wrongdoing and should not be held liable. The company's directors argued that the company has adopted a strict Standard Operating Procedure (SOP) and always ensures the quality of products and safety of the customers as a priority. After the first trial on 30 November 2020, considering all available evidence, the company's legal adviser believes that OrgaBest Bhd would probably successfully defend the court case. The case was scheduled to be heard again in court on 20 February 2021. Upon further investigation, it was found that an incident of electricity supply disconnection occurred at the warehouse owned by Fresh Nature Sdn Bhd, two days before the incident where the customers suffered from food poisoning. Fresh Nature Sdn Bhd uses the warehouse to store fruits before delivering them to its customers. On 15 November 2020, OrgaBest Bhd had initiated legal action against Fresh Nature Sdn Bhd on the grounds that the power outage at its warehouse had damaged the fruits and caused the customers to suffer from food poisoning resulting in the company's image and sales deteriorating. The company's lawyer is of the opinion that it is probable that the company will receive a compensation amounting to RM80,000 from Nature Fresh Sdn Bhd. Due to increasing organic material prices, OrgaBest Bhd anticipated that the company would suffer financial losses in 2021. Thus, the company decided to provide the expected losses of RM20,000 in 2021 in the current financial year ended 31 December 2020. Required: a. Differentiate between trade payables and provisions. (5 marks) b. Explain the appropriate classification of the lawsuit filed by OrgaBest Bhd against Fresh Nature Sdn Bhd. (5 marks) C. Discuss the appropriate treatment for the lawsuit faced by the OrgaBest Bhd for the year ended 31 December 2020. (5 marks) d. Explain the accounting treatment of the future operating losses expected to be incurred in 2021 in respects of the financial year ended 31 December 2020. (5 marks) (Total: 20 marks)