Pendleton Company, a merchandising company, is developing its master budget for the year. The income statement for the prior year is as follows:

Pendleton Company

Income Statement

For Year Ending December $31,$ Prior Year

Gross sales $$750,000$

Less uncollectible accounts $7,500$

Collected sales $742,500$

Cost of goods sold $430,000$

Profit before operating expense $312,500$

Operating expenses $($including $$25,000$ depreciation$)200,500$

Income before tax $$112,000$

The following are management$’$s goals and forecasts for the year:

$1.$ 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 uncollectible are $2$ percent of budgeted sales.

Required

Prepare a budgeted functional income statement for the year.

Do not use negative signs with any of your answers.