Pendleton Company, a merchandising company, is developing its master budget for 2015. The income statement for 2014 is as follows:

Gross sales	$750,000
Less estimated uncollectible accounts	(7,500)
Net sales	742,500
Cost of goods sold	(430,000)
Gross profit	312,500
Operating expenses (including $25,000 depreciation)	(200,500)
Net income	$112,000

The following are management's goals and forecasts for 2015:

1. Selling prices will increase by 6 percent, and sales volume will increase by 4 percent.

2. The cost of merchandise will increase by 3 percent.

3. All operating expenses are fixed and are paid in the month incurred. Price increases for operating expenses will be 10 percent. The company uses straight-line depreciation.

4. The estimated uncollectibles are 2 percent of budgeted sales.

REQUIRED: Prepare a budgeted functional income statement for 2015.