US CMA Part 1 – 1 MCQ per Topic
*1. Investment in Associates vs Subsidiary + Consolidation*
*Q:* Parent owns 30% of Associate. Associate earns $100k net income. Parent’s share?
A. $0 B. $30k dividend only C. $30k equity income D. $100k full consolidation
*Answer:
*Logic:* 20-50% ownership = Significant influence → Equity method. Parent recognizes 30% x 100k = $30k in Income Statement. Consolidation only for >50% subsidiary.
*2. Elimination of Intercompany Owing + Unrealized Gain in Inventory*
*Q:* S sold goods to P for $20k, cost $12k. P still has all inventory at year-end. Parent owns 100% of S. What adjustment?
A. Dr Sales $20k, Cr COGS $12k, Cr Inventory $8k
B. Dr Inventory $8k, Cr COGS $8k
C. No entry needed
D. Dr Sales $12k, Cr Inventory $12k
*Answer:
*Logic:* Eliminate intercompany sale + unrealized profit in inventory. $8k = 20k-12k is unrealized till sold to outside party.
*3. Revenue Recognition – 5 Step Model ASC 606*
*Q:* Which is NOT a step?
A. Identify performance obligation
B. Allocate transaction price
C. Recognize revenue at cash receipt
D. Determine transaction price
*Answer:
*Logic:* 5 steps: Contract → PO → Price → Allocate → Recognize when obligation satisfied. Cash receipt ≠ revenue trigger.
*4. Depreciation Methods – DDB vs SYD*
*Q:* Asset cost $10,000, salvage $1,000, life 4 years. Year 2 DDB depreciation?
A. $2,250 B. $2,700 C. $3,375 D. $4,500
*Answer:
*Logic:
*5. Operating Lease vs Finance Lease – ASC 842 Criteria*
*Q:* Which makes lease a finance lease?
A. Lease term = 60% of economic life
B. PV of lease payments = 85% of asset FV
C. No transfer of ownership
D. Lessee can cancel anytime
*Answer:
*Logic:* Finance lease if any 1 of 5: 1. Ownership transfer 2. Purchase option 3. Lease term ≥75% life 4. PV ≥90% FV 5. Specialized asset. 85% < 90% so not B, but 90%+ is trigger. If Q gives 95% → finance lease.
*6. Warranty Liabilities – Contingency*
*Q:* Estimated warranty cost 2% of $1M sales. Journal entry?
A. Dr Warranty Expense $20k, Cr Cash $20k
B. Dr Warranty Expense $20k, Cr Warranty Liability $20k
C. Dr Cash $20k, Cr Warranty Revenue $20k
D. No entry till claim
*Answer:
*Logic:*
*7. Allowance for Receivables + DDB*
*Q:* AR $500k, estimated uncollectible 3%. Beginning Allowance $8k Cr. Bad debt expense?
A. $7k B. $15k C. $23k D. $8k
*Answer:
*Logic:*
*8. Deferred Tax – Timing vs Permanent Difference*
*Q:* Warranty expense recognized now for book, deductible when paid for tax. This creates?
A. Deferred Tax Asset
B. Deferred Tax Liability
C. Permanent difference
D. No difference
*Answer:
*Logic:* Book expense > Tax deduction now → Lower book income now, higher tax income later. Future tax savings = DTA. Permanent diff = never reverses, ex: fines.
*9. Current Tax vs Prior Period Adjustment*
*Q:* Error found in 2024 tax return in 2025. Treatment?
A. Adjust 2025 current tax expense
B. Prior period adjustment to retained earnings, net of tax
C. Ignore it
D. Restate 2024 IS
*Answer:
*Logic:
*10. Cash Flow from Operations – Indirect Method*
*Q:* Net income $50k, Depreciation $10k, AR ↑ $5k, AP ↑ $3k. CFO?
A. $52k B. $58k C. $62k D. $68k
*Answer:
*Logic:*
*11. AFS Investment – Fair Value Change*
*Q:* AFS security bought $100k, year-end FV $110k. Where record $10k gain?
A. Net Income
B. OCI – Accumulated OCI
C. Retained Earnings
D. Liability
*Answer
*Logic:*
*12. Job Order vs Process Costing*
*Q:* Best for custom furniture?
A. Process costing
B. Job order costing
C. ABC
D. Variable costing
*Answer:
*Logc
*13. Absorption vs Variable Costing*
*Q:* Production 10k units, sales 8k units, fixed OH $20k. How much fixed OH deferred in inventory under absorption?
A. $0 B. $4,000 C. $16,000 D. $20,000
*Answer:
*Logic:*
*14. Labour Efficiency Variance*
*Q:* Standard 2 hrs @ $15/hr. Actual 9,500 hrs for 5,000 units. LEV?
A. $7,500 F B. $7,500 U C. $15,000 F D. $15,000 U
*Answer
*Logic:
*15. ROI vs RI*
*Q:* Division: Operating income $40k, Assets $200k, Min required return 15%. RI?
A. $10k B. $30k C. $40k D. $70k
*Answer:
*Logic:*
*16. Variable OH 2/3/4-way Variance Analysis*
*Q:* 3-way analysis includes which?
A. Spending + Efficiency + Volume
B. Spending + Efficiency only
C. Budget + Volume + Price
D. Rate + Quantity
*Answe
*Logic:* 2-way: Budget + Volume. 3-way: Spending + Efficiency + Volume. 4-way splits Spending into Rate + Quantity.
*17. JIT vs MRP vs MRP II*
*Q:* Key feature of JIT?
A. Large safety stock
B. Pull system, small lot sizes
C. Master schedule driven
D. Centralized planning
*Answer
*Logic:* JIT = Pull, Kanban, zero inventory. MRP = Push, based on forecast. MRP II = MRP + finance + HR.
*18. Balanced Scorecard – CSF*
*Q:* “Reduce defect rate to <1%” is CSF for which perspective?
A. Financial
B. Customer
C. Internal Process
D. Learning & Growth
*Answer
*Logic
*19. Internal Control Failed + Audit Opinion*
*Q:* Material weakness in controls, but FS are correct. Auditor gives?
A. Unqualified opinion
B. Qualified opinion
C. Adverse opinion
D. Disclaimer
*Answer:
*Logic:* Opinion on FS = unqualified if FS fair. Separate report on ICFR would be “adverse” due to material weakness. CMA tests this split.
*20. Parts of Corporate Governance*
*Q:* Which is NOT part?
A. Board of Directors
B. Audit Committee
C. External Auditor
D. Marketing Manager
*Answer
*Logic:* Governance = Board, Committees, External auditor, Internal audit, Management oversight. Marketing = operations.
*21. Types of Risk*
*Q:* Loss due to supplier bankruptcy is?
A. Market risk
B. Credit risk
C. Operational risk
D. Liquidity risk
*Answer:
*Logic:* Operational risk = process, people, systems, external events. Supplier failure = supply chain risk under operational.
*22. Management by Exception + MBO + Kaizen*
*Q:* “Continuous improvement in small steps” = ?
A. MBE
B. MBO
C. Kaizen
D. Six Sigma
*Answer:
*Logic:* Kaizen = continuous incremental improvement. MBO = goals set jointly. MBE = focus only on variances.
*23. Inflation Effects on Inventory + Cash Equivalents*
*Q:* Under inflation, FIFO vs LIFO ending inventory?
A. FIFO lower, COGS higher
B. FIFO higher, COGS lower
C. Both same
D. LIFO higher, COGS lower
*Answer:
*Logic:* Inflation → FIFO uses older cheap costs → Higher ending inventory, lower COGS, higher profit. LIFO opposite.
*Cash Equivalents:* 3 months or less maturity. 6-month T-bill ≠ cash equivalent.
*24. Short-term Debt as Non-Current + Theories*
*Q:* 1-year note payable can be classified as non-current if?
A. Company has intent + ability to refinance long-term
B. Always current
C. If amount < 10% of assets
D. Never
*Answer
*Logic:*
*Residual Theory:* Equity = Assets - Liabilities. Proprietary = Assets = Equities. Capital Maintenance = profit only after maintaining capital.
*25. Data Mining vs Data Warehouse + Product Life Cycle*
*Q:* “Analyzing patterns from large datasets” is?
A. Data Warehouse
B. Data Mining
C. ETL
D. Big Data
*Answer
*Logic:* Warehouse = storage. Mining = analysis/patterns. PLC stages: Intro, Growth, Maturity, Decline.
Batch 2: Next 25 US CMA Part 1
*Batch 2: Part 1 Case-Based MCQs 26-50*
*26. Segment Reporting – ASC 280*
*Q:* Segment reported if it meets any 1 test. Which is NOT a test?
A. 10% of revenue test
B. 10% of profit/loss test
C. 10% of assets test
D. 10% of employee count test
*Answer:
*Logic:* 3 quantitative tests: Revenue, Profit/Loss, Assets ≥10% of combined total. Employee count not used.
*27. Internal Control Failed – System Control*
*Q:* Company has no segregation of duties in AP. Same clerk approves + pays invoices. This violates?
A. Control Environment
B. Control Activities
C. Risk Assessment
D. Monitoring
*Answer:
*Logic:* Segregation of duties = Control Activity. COSO 5 components: Control Env, Risk Assess, Control Act, Info & Comm, Monitoring.
*28. Data Integrity + System Controls*
*Q:* Control to ensure no duplicate vendor payments is?
A. Input control
B. Processing control
C. Output control
D. Access control
*Answer
*Logic:* Processing control = logic checks during processing, ex: duplicate check, sequence check. Input = valid data entry.
*29. Audit Opinion Types*
*Q:* Auditor cannot obtain sufficient evidence due to client restriction. FS may be misstated. Opinion?
A. Unqualified
B. Qualified – Scope limitation
C. Adverse
D. Disclaimer
*Answer
*Logic:* Scope limitation + material + pervasive = Disclaimer. If not pervasive = Qualified. Misstatement = Qualified/Adverse.
*30. Corporate Governance – Parts*
*Q:* Which committee oversees financial reporting & internal controls?
A. Compensation Committee
B. Audit Committee
C. Nomination Committee
D. CSR Committee
*Answer
*Logic:* Audit Committee = financial reporting, ICFR, external auditor oversight per SOX.
*31. Types of Risk*
*Q:* Loss from USD/INR rate change on import payable is?
A. Business risk
B. Foreign exchange risk
C. Interest rate risk
D. Strategic risk
*Answe
*Logic:* FX risk = currency fluctuation risk. Market risk sub-type.
*32. Management by Exception*
*Q:* Manager only investigates variances >$10k or >10%. This is?
A. MBO
B. Kaizen
C. Management by Exception
D. Benchmarking
*Answer:
*Logic:*
*33. MBO – Management by Objectives*
*Q:* Key feature of MBO?
A. Top-down goals only
B. Joint goal setting by manager + employee
C. No feedback needed
D. Fixed budget
*Answer:
*Logic:* MBO = participative. Goals set jointly → higher motivation + accountability.
*34. Kaizen vs Six Sigma*
*Q:* Continuous small improvements by all employees = ?
A. Six Sigma
B. Kaizen
C. JIT
D. TQM
*Answer:
*Logic:* Kaizen = everyone, small steps daily. Six Sigma = project-based, data-driven, defect reduction.
*35. Inflation Effect on Inventory Valuation*
*Q:* In inflation, which method gives lowest tax?
A. FIFO
B. LIFO
C. Weighted Average
D. Specific ID
*Answer:
*Logic...
*36. Cash & Cash Equivalents*
*Q:* Which is NOT cash equivalent?
A. Treasury bill maturing in 60 days
B. Money market fund
C. Commercial paper maturing in 4 months
D. Bank deposit
*Answer:
*Logic
*37. Short-term Debt as Non-Current Liability*
*Q:* Condition to classify 9-month loan as non-current?
A. Management intent only
B. Refinancing agreement signed before BS date
C. Loan < 5% of total debt
D. Never possible
*Answer
*Logic:
*38. Residuary vs Proprietary vs Capital Maintenance Theory*
*Q:* “Profit is residual after maintaining capital” = ?
A. Proprietary theory
B. Residuary theory
C. Capital Maintenance theory
D. Entity theory
*Answer:
*Logic:*
*39. Data Mining vs Data Warehouse*
*Q:* Central repository of historical data from multiple sources = ?
A. Data Mining
B. Data Warehouse
C. Dashboard
D. OLAP
*Answer:
*Logic:*
*40. Product Life Cycle + Strategic Implications*
*Q:* In decline stage, best strategy?
A. Increase R&D spending
B. Harvest or divest
C. Penetration pricing
D. Market development
*Answer:
*Logic:
*41. Consolidation of Income Statement*
*Q:* Parent owns 80% of Sub. Sub net income $100k, sold goods to Parent for $50k profit, unsold to outsiders. Consolidated NI?
A. $140k B. $150k C. $180k D. $200k
*Answer:
*Logic:*
*42. Differential Cost / Relevant Cost*
*Q:* Make vs Buy: Make cost $12/unit. Buy $11/unit but $1/unit fixed OH unavoidable. Decision?
A. Make, save $1
B. Buy, save $1
C. Indifferent
D. Make, save $2
*Answer
Logic...
*43. Job Order Costing*
*Q:* Job 101 used DM $5k, DL $3k, OH applied 150% of DL. Job cost?
A. $8,000 B. $11,000 C. $12,500 D. $15,500
*Answer:
*Logic:*
*44. Process Costing – Cost per Unit*
*Q:* 10,000 units started, 2,000 ending WIP 50% complete. Total cost $96,000. Cost/unit?
A. $8 B. $9 C. $10 D. $12
*Answer:
*Logic:*
*45. Strategic Management – Porter’s 5 Forces*
*Q:* High threat of new entrants when?
A. High capital requirement
B. Strong brand loyalty
C. Low economies of scale
D. High switching costs
*Answer
Logic...
*46. Labour Efficiency Variance – Reasons Unfavorable*
*Q:* LEV unfavorable most likely due to?
A. Hiring skilled workers at higher wage
B. Machine breakdown causing idle time
C. Material price increase
D. Sales volume drop
*Answer:
*Logic...
*47. ROI vs RI – Divisional Performance*
*Q:* Division A ROI 18%, Min rate 15%. Division B ROI 22%, Min rate 20%. Which creates more value?
A. A, higher ROI
B. B, higher ROI
C. A, higher RI
D. Both same
*48. Responsibility Centre*
*Q:* Division manager controls costs + revenues but not investments = ?
A. Cost centre
B. Profit centre
C. Investment centre
D. Revenue centre
*Answer:
*Logic:* Profit centre = revenues - costs. Investment centre = + assets/investments controlled.
*49. Variable OH Spending Variance 4-way*
*Q:* 4-way analysis splits spending variance into?
A. Rate + Quantity
B. Budget + Volume
C. Price + Efficiency
D. Fixed + Variable
*Answer:
*Logic:* 4-way: Spending = Rate variance + Quantity variance. Efficiency = separate. Volume = separate.
*50. Engineering vs Differential Cost*
*Q:* Cost estimated from physical input-output relationship by engineers = ?
A. Historical cost
B. Differential cost
C. Engineered cost
D. Discretionary cost
*Answer:
*Logic:
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