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 budget information:

The company expects to sell about $15\%$ of its merchandise for cash. Of sales on account, $70\%$

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 December, and the annual property taxes are paid in September. Of the remainder of the

manufacturing 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 of April $1$ include cash of $$42,000,$ marketable securities of $$25,000,$ and

accounts receivable of $$198,000($ $$150,000$ from March sales and $$48,000$ from February sales$).$

Sales on account in February and March were $$120,000$ and $$150,000,$ respectively. Current

liabilities as of April $1$ include $$14,000$ of accounts payable incurred in March 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 May. Mercury Shoes' regular

quarterly dividend of $$15,000$ is expected to be declared in May and paid in June. Management desires

to maintain a minimum cash balance of $$40,000.$

a$.$ Prepare a monthly cash budget and supporting schedules for April, May, and June.

b$.$ On the basis of the cash budget prepared in part $($a$),$ what recommendation should be made to

the controller in regards to cash?