The management at Inverness Manufacturing feels confident about the company's prospect in the current year (year 2). Sales in the first quarter were one-third ahead of last year, and the sales department predicted that this rate would continue throughout the entire year. The controller asked the budget team to prepare a draft forecast for the year and to analyze the differences from last years results. They decided to base the forecast on actual results obtained in the first quarter plus the expected costs of production to be completed in the remainder of the year. They worked with various department heads (production, sales, and so on) to get the necessary information. The results of these efforts follow:

INVERNESS MANUFACTURING
Expected Account Balances for December 31, Year 2
Cash	$ 7,000
Accounts receivable	248,000
Inventory (January 1, Year 2)	152,000
Plant and equipment	406,000
Accumulated depreciation		$ 131,000
Accounts payable		143,000
Notes payable (due within one year)		158,000
Accrued payables		77,750
Common stock		218,000
Retained earnings		313,600
Sales revenue		1,880,000
Other income		35,000
Manufacturing costs
Materials	647,000
Direct labor	662,000
Variable overhead	398,000
Depreciation	23,000
Other fixed overhead	25,250
Marketing
Salaries	49,600
Commissions	68,000
Promotion and advertising	153,000
Administrative
Salaries	56,000
Travel	11,500
Office costs	31,000
Income taxes
Dividends	19,000
	2,956,350	2,956,350

Adjustments for the change in inventory and for income taxes have not been made. The scheduled production for this year is 229,000 units, and planned sales volume is 208,000 units. Sales and production volume was 158,000 units last year. The company uses a full-absorption costing and FIFO inventory system and is subject to a 20 percent income tax rate. The actual income statement for last year follows:

INVERNESS MANUFACTURING
Statement of Income and Retained Earnings
For the Budget Year Ended December 31, Year 1
Revenues
Sales revenue		$ 1,430,000
Other income		53,000	$ 1,483,000
Expenses
Cost of goods sold
Materials	$ 428,000
Direct labor	413,000
Variable overhead	251,000
Fixed overhead	40,000
	$ 1,132,000
Beginning inventory	152,000
	$ 1,284,000
Ending inventory	152,000	$ 1,132,000
Selling
Salaries	$ 44,500
Commissions	53,000
Promotion and advertising	98,500	196,000
General and administrative
Salaries	$ 46,000
Travel	10,000
Office costs	28,000	84,000
Income taxes		15,800	1,427,800
Operating profit			55,200
Beginning retained earnings			277,400
Subtotal			$ 332,600
Less dividends			19,000
Ending retained earnings			$ 313,600

Required:

Prepared a budgeted income statement and balance sheet for year 2.