On January 1, 2024, two private companies that report under ASPE, Sunland Ltd. and Cale Inc., were incorporated. Each company operates a restaurant and had identical revenues during the year of $4 million, but Sunland bought its building for $1.5 million and the related land for $600,000. The company estimated that the building would have a useful life of 20 years with no residual value. Sunland uses the straight-line method of depreciation. Because of the building purchase, Sunland had an outstanding 4% bank loan during the year amounting on average to $2.8 million.

Cale, however, did not buy a building. Instead, it rented a building under a five-year operating lease starting on January 1, 2024, for $17,000 per month. Because of this, the company had to install leasehold improvements for $100,000, which were completed in the first few days of January. Because Cale did not have to buy a building, its outstanding 4% bank loan during 2024 averaged only $350,000.

The income tax rate for both companies is 22%. Assume both companies had identical revenues and expenses except for the items noted above.

Sunland had net income of $175,000 and Cale have net income of $135,220 for the year ended December 31, 2024.

Q-1) If Sunland had total assets of $3,065,000 as at December 31, 2024, and the only differences between the assets of Sunland and Cale related to land, buildings, and leasehold improvements, the latter being depreciated over the term of the lease, what are the total assets for Cale at the end of 2024?

Q-2) Calculate the asset turnover ratio for both companies for 2024. (Hint: Because this is the first year of operations, you can use the year-end asset balance rather than the average asset balance for the denominator.)

Q-3) Calculate the profit margin ratio for both companies for 2024.

Q-4) Calculate the return on assets ratio for both companies for 2024. (Hint: Because this is the first year of operations, you can use the year-end asset balance rather than the average asset balance for the denominator.)