The controller of Mercury Shoes Inc. instructs you to prepare a monthly cash budget for the. next three months. You are presented with the following Ex\". budget information: Show MI Haw _ 1""1' ___ _"""___\"19"'_' Sales... . .. . . .. ..... .. . 5160.000 5135.000 5200.000 Manufacturing coals .. ... ... .... . . . ... . . .. [36.000 82.000 105.000 Selllng and admlnlstrative expenses . . .. 40.000 46.000 51.000 Capitalexpendltures .. .. . . . 120.000 The company expects to sell about 10% of its merchandise for cash. Ofsales on account. 60% are expected to be collected in the month following the sale and the remainder the following month [second month after sale]. Depreciation. insurance. and property tax expense represent $12,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in February, and the annual property taxes are paid in November 0fthe remainder of the mamifacturing costs. 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as ofJune '1 include cash of $42,000. marketable securities of $25,000. and accounts receivable of$'198.000 [$150,000 from May sales and $48,000 from April sales). Sales on account in April and May were $120,000 and $150,000. respectively. Current liabilities as ofjune 1 include $13,000 ofaccounts payable incurred in May for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of$24.000 will be made in July. Mercury Shoes' regular quarterly dividend of $15,000 is expected to be declared in July and paid in August. Management wants to maintain a minimum cash balance of 340.000. 5...!\" ... 1,... \"a\": s.fl_.vtlca\\..s.ke1.: 1, Prepare a monthly cash budget and supporting schedules for Inne, luly, and August. '. .4 Check Figure: August deficiency. 559.000 2. .._- 0n the basis ofthe cash budget prepared in part [1), what recommendation should be made to the controller? MERCURY SHOES INC. Cash Budget For the Three Months Ending June 30 June July August Estimated cash receipts from: Cash sales 16,000 $ 18,500 $ 20,000 Collections from accounts receivable 138,000 146,400 157,500 Total cash receipts 154,000 164,900 177,500 Estimated cash payments for: Manufacturing costs $ 56,200 $ 66,800 $ 88,400 Selling and administrative expenses 40,000 46,000 51,000 Capital expenditures 120,000 Other purposes: Income tax 24,000 Dividends 15,000 Total cash payments 6.200 136,800 $ 274,400 Cash increase (decrease) 57,800 28,100 $ (96,900) Cash balance at beginning of month 42,000 99,800 127,900 Cash balance at end of month $ 99.800 $ 127,900 $ 31,000 Minimum cash balance 40,000 40,000 40,000 Excess (deficiency) 59.800 87.900 19.0001 Supporting calculations Collections of accounts receivable: Sales on Account Percentage June July August April sales 180,000 * 0% $ 48.000 $ $ May sales: Collected in June 180,000 0% 30.000 Collected in July 180,000 . 0% 60,000 June sales Collected in July 180,000 0% 36,400 Collected in August 180,000 0% 57.600 July sales 180,000 0% 99.900 $ 138.000 $ 146.400 157.500 Payments for manufacturing costs: Costs on Account Percentage Payments Paid in June: Incurred in May Incurred in June 0% Total Paid in July: Incurred in June 0% ncurred in July 0% Total Paid in August: Incurred in July 0% Incurred in AL 0% Total