Question 1: (5*2: 10 marks)

(a) Explain the master budget process. (5 marks)

(b) The records of Dubai Company revealed the following information (5 marks):

Credit and budgeted sales are respectively as follows:

February, $700,000; March, $720,000; and April, $800,000.Dubai Company collects 70% of its sales in the month of sale and 30% in the following month.

Cost of goods sold accounts 60% of sales.

Cost of purchases equals 65% of the next month's sales and are paid in the month following acquisition.

Cash selling and administrative expenses total $120,000 per month and are paid when incurred.

Depreciation per month amounts to $36,000.

Selected amounts taken from the January 31 balance sheet were:

Accounts receivable, $230,000; plant and equipment (net), $214,000; and retained earnings, $170,000.

Required:

Prepare budgeted income statement that summarizes activity for the two months ended March 31, 20x1(5marks)