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

Gross sales $2,000,000
Less: Estimated uncollectible accounts (40,000)
Net sales 1,960,000
Cost of goods sold (1,100,000)
Gross profit 860,000
Operating expenses (including $25,000 depreciation) (500,000)
Net income $360,000

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

a. Selling prices will increase by 6 percent, and sales volume will increase by 4 percent.
b. The cost of merchandise will increase by 3 percent.
c. 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.
d. The estimated uncollectibles are 2 percent of budgeted sales.

Required
Prepare a budgeted functional income statement for 2015.