PROBLEM 5-21 Cost Flows; T-Accounts; Income Statement [LO3, LOS, LO7] PQB Inc. designs and fabricates movie props such as mock-ups of star fighters and cybernetic robots. The company's balance sheet as of January 1, the beginning of the current year, appears below. Since each prop is a unique design and may require anything from a few hours to a month or more to complete, PQB uses a job-order costing system. Overhead in the fabrication shop is charged to props on the basis of direct labour cost. The company estimated that it would incur $80,000 in manufacturing overhead and $100,000 in direct labour cost during the year. The following transactions were recorded during the year: a Raw materials, such as wood, paints, and metal sheeting, were purchased on account: $80,000. b. Raw materials were issued to production: $90,000 ($5,000 of this amount was for indirect materials). c. Payroll costs were incurred and paid: direct labour, $120,000, indirect labour, $30,000; and selling and administrative salaries, $75,000. d Fabrication shop utilities costs were incurred: $12,000. e Depreciation was recorded for the year: $30,000 ($5,000 on selling and administrative assets; $25,000 on fabrication shop assets). f Prepaid insurance expired: $4,800 ($4,000 related to fabrication shop operations, and $800 related to selling and administrative activities). g. Shipping expenses were incurred: $40,000. h. Other manufacturing overhead costs were incurred: $17,000 (credit Accounts Payable). Manufacturing overhead was applied to production. Overhead is applied on the basis of direct labour cost. J. Movie props that cost $310,000 to produce according to their job cost sheets were completed. k Sales for the year totalled $450,000 and were all on account. The total cost to produce these movie props was $300,000 according to their job cost sheets. Collections on account from customers totalled $445,000. m. Payments on account to suppliers totalled $150,000.