Only Question 5 & 6 .

prepare the pro forma income statement & find the net cash paid or avaialble to the owner.

IMA EDUCATIONAL Case Journal Case Study Fashion Designs International, Inc. George Gonzalez, PhD, Assistant Professor Accounting University of Lethbridge-Calgary Campus Calgary, Alberta, Canada ima The Association of Accountants and Financial Professionals in Business ISSN 1940-204X INTRODUCTION "Balancing quantitative and qualitative factors can be quite a challenge," Charles Riley thought to himself. Riley is the CFO of Fashion Designs International, Inc. (FDI), a small women's apparel business. The CEO and sole shareholder of FDI, Alina Rossi, had asked Riley for suggestions about how to increase the company's profits to the level that matched her financial goals. Riley knew, however, that there were qualitative factors of importance to Rossi that posed challenges. FDI, based in Greensboro, North Carolina, manufactures and distributes women's apparel to retailers worldwide under the brand name Rossi Designs. Headed by Rossi, an Italian- educated, award-winning fashion designer with a high work ethic and a perfectionist streak, the company's products are considered of excellent quality by consumers and retailers. The designs, fabric, and processes used in production all contribute to this high level of quality. Since its inception in 2001, the company has grown steadily to annual sales of US$2.25 million in 2016 (see Table 1). ALINA ROSSI, FASHION DESIGNER Alina Rossi studied fashion design in Italy and, upon completing her studies, moved back to the United States) where her family had emigrated when she was 10 years old. Rossi was a highly creative designer who almost certainly could have done well by selling her designs to large international fashion companies but chose instead to start her own company. Rossi started her fashion business in 2001 by selling women's apparel to small U.S.-based boutique shops. Her designs-particularly popular with women in their 20s, 30s, and 40s-sold quickly, and her business grew accordingly. After several years, her market expanded to include Canada, Mexico, and a few countries in Europe. Rossi tends to be a perfectionist both with her designs and in her insistence on high production quality. This manifests itself in her close supervision of production processes, to a point of near-obsession with ensuring the high apparel standards that she demands. APPAREL PRODUCTION The production of FDI's products is composed of three major phases: (1) manufacturing the fabric to be used for apparel pieces, (2) cutting the fabric according to the particular apparel piece's design, and (3) sewing the cut fabric into apparel wear. FDI's women's outfits are made from high-quality fabric, which Rossi specifies to the fabric manufacturer, a company based in Toronto, Ontario, Canada. Large rolls of fabric manufactured for FDI are shipped to FDI's warehouse in Greensboro, where they are stored until ready to be used in production runs. At such time, fabric is sent to the cutting shop where the fabric is cut into large pieces of specific size and shape, as specified by Rossi's design. Finished cut pieces are then delivered to the sewing shop. In the sewing process, cut pieces are sewn as prescribed by Rossi into final products, which is then transported to FDI's warehouse until ready for shipment to retailers (for instance, FDI's main customers). The cutting