US CMA PART 1 - 25 ILLUSTRATION QUESTIONS WITH ANSWERS
_High-Yield Numericals for Exam Practice_
*1. CASH BUDGET*
*Q1.* Beg cash $15,000. Min required $10,000. Collections: $80,000. Payments: $95,000.
*Ans:* Total available = 95,000. Excess = 0. Borrowing needed = $10,000. Ending cash = $10,000
*2. PRODUCTION BUDGET*
*Q2.* Sales budget: Q1 5,000, Q2 6,000 units. Beg FG 800. Desired end FG = 20% of next qtr sales.
*Ans:* Q1 Production = 5,000 + 1,200 - 800 = *5,400 units*
*3. FLEXIBLE BUDGET*
*Q3.* Static budget 10,000 units. VC $5/unit, FC $20,000. Actual 12,000 units.
*Ans:* Flexible budget = [12,000 × 5] + 20,000 = *$80,000*
*4. IMPAIRMENT LOSS - IFRS/US GAAP*
*Q4.* Carrying value $100,000. Fair value $75,000. Value in use $80,000.
*Ans:* Recoverable amount = higher of 75k, 80k = $80,000.
*Impairment Loss = 100,000 - 80,000 = $20,000*
*5. CONSOLIDATED FS - BASIC*
*Q5.* Parent buys 80% of Sub for $400,000. Sub Equity $450,000.
*Ans:* NCI = 20% × 450,000 = $90,000. Goodwill = 400,000 - [80%×450,000] = *$40,000*
*6. CAPITAL LEASE CRITERIA*
*Q6.* Which is NOT a capital lease criteria?
A. Ownership transfer B. Bargain purchase C. Lease term 70% of life D. PV < 90% of FV
*Ans: D*. Must be ≥90% for capital lease
*7. REVENUE RECOGNITION - 5 STEPS*
*Q7.* Company receives $12,000 for 12-month service contract in Jan.
*Ans:* Recognize $1,000 per month. Dec 31 Unearned Revenue = *$11,000*
*8. INVESTMENT IN ASSOCIATES - EQUITY METHOD*
*Q8.* Buy 30% for $300,000. Associate earns $100,000, pays dividend $40,000.
*Ans:* Share of income = 30,000. Dividend = 12,000. Investment = 300,000 + 30,000 - 12,000 = *$318,000*
*9. INVESTMENT IN SUBSIDIARY*
*Q9.* Parent sells goods to Sub $50,000, cost $30,000. 40% unsold at year end.
*Ans:* Unrealized profit = [50,000-30,000]×40% = *$8,000*. Eliminate from Inventory & COGS
*10. ELIMINATION OF INTERCOMPANY OWING*
*Q10.* Parent owes Sub $20,000.
*Ans:* JE: `Accounts Payable 20,000 Dr | Accounts Receivable 20,000 Cr`
*11. UNREALIZED GAIN IN CONSOLIDATED IS*
*Q11.* Above Q9. Tax rate 30%.
*Ans:* Eliminate $8,000 profit. Deferred tax asset = 8,000×30% = *$2,400*
*12. DEFERRED TAX LIABILITY*
*Q12.* Book depreciation $20,000. Tax depreciation $35,000. Tax rate 25%.
*Ans:* Taxable income < Book income. DTL = [35,000-20,000]×25% = *$3,750*
*13. ADJUSTMENT OF EXCESS TAX PROVISION*
*Q13.* Prior year tax provision $50,000. Actual $45,000.
*Ans:* JE: `Income Tax Payable 5,000 Dr | Income Tax Expense 5,000 Cr`
*14. OTHER COMPREHENSIVE INCOME*
*Q14.* Which is OCI? A. Sales B. Unrealized gain on AFS C. Rent Expense
*Ans: B*. OCI items: FX translation, AFS gains/loss, Pension adjustments
*15. ALLOCATION OF OVERHEADS*
*Q15.* Service dept cost $60,000. Allocated based on employees: Dept A 30, Dept B 20.
*Ans:* A = 60,000 × 30/50 = *$36,000*. B = *$24,000*
*16. JOB ORDER COST SHEET*
*Q16.* Job 101: DM $4,000, DL $3,000, MOH applied 150% of DL.
*Ans:* Total cost = 4,000 + 3,000 + 4,500 = *$11,500*
*17. OVERAPPLIED/UNDERAPPLIED OH*
*Q17.* Applied OH $90,000. Actual OH $95,000.
*Ans:* *Underapplied $5,000*. JE: `COGS 5,000 Dr | MOH Control 5,000 Cr`
*18. OVERCOSTING / UNDERCOSTING*
*Q18.* Product uses 1 DLH. System allocates $10/DLH but actual consumption is 2 machine hrs @ $15/MH.
*Ans:* *Undercosting*. Product consuming more of expensive resource but getting less cost.
*19. SALES VARIANCE*
*Q19.* Budget: 1,000 units @ $50. Actual: 1,200 units @ $48.
*Ans:* Sales Volume Var = [1,200-1,000]×50 = *$10,000 F*
Sales Price Var = [48-50]×1,200 = *$2,400 U*
*20. VOH EFFICIENCY + FOH SPENDING VARIANCE*
*Q20.* Std VOH $4/DLH. Actual 5,200 hrs for 5,000 units. Std 1hr/unit. Actual VOH $22,000. Budgeted FOH $30,000.
*Ans:* VOH Eff Var = [5,200-5,000]×4 = *$800 U*
FOH Spending Var = 22,000 - 30,000 = *$8,000 F*
*21. 3-WAY VARIANCE ANALYSIS*
*Q21.* FOH Budget $40,000. Applied $38,000. Actual $42,000.
*Ans:* Spending Var = 42,000-40,000 = *4,000 U*
Volume Var = 40,000-38,000 = *2,000 U*
Efficiency Var = 0 for FOH
*22. ROI AND RI*
*Q22.* Division: Income $200,000, Assets $1,000,000, Min return 12%.
*Ans:* ROI = 200,000/1,000,000 = *20%*
RI = 200,000 - [1,000,000×12%] = *$80,000*
*23. TRANSFER PRICING*
*Q23.* Selling division VC $20, excess capacity. Market price $50. Buying division external $48.
*Ans:* Transfer price range = *$20 to $48*. Use market price if no excess capacity.
*24. EPS + STOCK DIVIDEND*
*Q24.* NI $500,000. 100,000 shares. 10% stock dividend declared.
*Ans:* New shares = 110,000. EPS = 500,000/110,000 = *$4.55*
*25. LEARNING CURVE + EVPI*
*Q25.* 90% learning curve. First unit 100 hrs. Time for 4th unit?
*Ans:* Unit 2=90, Unit 4=81. *4th unit = 81 hours*
*EVPI* = Expected value with perfect info - Expected value without info
*US CMA PART 1 - 25 HIGH-YIELD MCQs WITH ANSWERS*
_Exam Pattern + Explanations_
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*Q1. CASH BUDGET*
Beg cash $8,000. Min balance $10,000. Cash receipts $50,000. Cash payments $55,000.
Borrowing needed?
A. $0 B. $2,000 C. $3,000 D. $7,000
*Ans: C. $3,000*
_Exp: Available = 8k + 50k - 55k = 3k. Need 10k. Borrow 7k? No, 3k + 7k = 10k. Wait 8+50-55=3. To reach 10k need 7k_
*Corrected Ans: D. $7,000*
*Q2. PRODUCTION BUDGET*
Sales 20,000 units. Beg FG 2,000. Desired End FG 3,000.
Production required?
A. 19,000 B. 21,000 C. 22,000 D. 25,000
*Ans: B. 21,000*
_Exp: 20,000 + 3,000 - 2,000 = 21,000_
*Q3. FLEXIBLE BUDGET*
Static budget 10,000 units, VC $6, FC $40,000. Actual 12,000 units.
Flexible budget total cost?
A. $100,000 B. $112,000 C. $120,000 D. $124,000
*Ans: B. $112,000*
_Exp: [12,000 × 6] + 40,000 = 112,000_
*Q4. IMPAIRMENT LOSS*
Carrying value $200,000. Fair value $150,000. Value in use $160,000.
Impairment loss?
A. $40,000 B. $50,000 C. $0 D. $60,000
*Ans: A. $40,000*
_Exp: Recoverable amount = higher of 150k, 160k = 160k. Loss = 200k - 160k = 40k_
*Q5. CONSOLIDATED FS - GOODWILL*
Parent pays $600,000 for 80% of Sub. Sub net assets FV $700,000.
Goodwill?
A. $40,000 B. $60,000 C. $80,000 D. $0
*Ans: A. $40,000*
_Exp: 600,000 - [80% × 700,000] = 600,000 - 560,000 = 40,000_
*Q6. CAPITAL LEASE CRITERIA*
Which is NOT a capital lease criteria under GAAP?
A. Ownership transfer B. Lease term 80% of economic life
C. PV 85% of FV D. Bargain purchase option
*Ans: C. PV 85% of FV*
_Exp: Must be ≥90%_
*Q7. REVENUE RECOGNITION*
$24,000 received for 1-year service contract on July 1. Revenue for Year 1?
A. $24,000 B. $12,000 C. $6,000 D. $0
*Ans: B. $12,000*
_Exp: 6 months = 24,000 × 6/12_
*Q8. INVESTMENT IN ASSOCIATES*
Buy 25% for $250,000. Associate earns $80,000, pays dividend $20,000.
Investment balance?
A. $265,000 B. $270,000 C. $255,000 D. $250,000
*Ans: A. $265,000*
_Exp: 250,000 + [25%×80,000] - [25%×20,000] = 250k + 20k - 5k_
*Q9. ELIMINATION OF INTERCOMPANY*
Parent sold to Sub $100,000, cost $60,000. 50% in ending inventory.
Unrealized profit to eliminate?
A. $20,000 B. $40,000 C. $10,000 D. $0
*Ans: A. $20,000*
_Exp: [100k-60k] × 50% = 20,000_
*Q10. DEFERRED TAX LIABILITY*
Tax depreciation > Book depreciation by $50,000. Tax rate 30%.
DTL created?
A. $15,000 B. $0 C. $50,000 D. $35,000
*Ans: A. $15,000*
_Exp: 50,000 × 30%_
*Q11. EXCESS TAX PROVISION ADJUSTMENT*
Prior year provision $40,000. Actual $35,000.
JE in current year?
A. Dr Tax Expense 5,000 B. Cr Tax Expense 5,000
C. Dr Tax Payable 5,000 D. Both B and C
*Ans: D. Both B and C*
_Exp: Dr Tax Payable 5,000 | Cr Tax Expense 5,000_
*Q12. OTHER COMPREHENSIVE INCOME*
Which is reported in OCI?
A. Sales Revenue B. Unrealized gain on AFS securities
C. COGS D. Interest Expense
*Ans: B. Unrealized gain on AFS securities*
*Q13. ALLOCATION OF OVERHEADS*
Service dept $90,000. Allocated by machine hours: Prod A 600hrs, Prod B 400hrs.
Cost to Dept A?
A. $36,000 B. $54,000 C. $45,000 D. $90,000
*Ans: B. $54,000*
_Exp: 90,000 × 600/1000_
*Q14. JOB ORDER COSTING*
Job: DM $5,000, DL $4,000. MOH applied 120% of DL.
Total job cost?
A. $9,000 B. $13,800 C. $14,800 D. $16,800
*Ans: C. $14,800*
_Exp: 5,000 + 4,000 + [4,000×120%] = 14,800_
*Q15. OVERAPPLIED OH*
Applied OH $120,000. Actual OH $115,000.
Treatment?
A. Dr COGS 5,000 B. Cr COGS 5,000 C. Dr MOH 5,000 D. No entry
*Ans: B. Cr COGS 5,000*
*Q16. OVERCOSTING/UNDERCOSTING*
Product uses complex machine but system allocates by DLH.
This will cause?
A. Overcosting B. Undercosting C. No effect D. Cross subsidization
*Ans: D. Cross subsidization*
_Exp: Simple products subsidize complex ones_
*Q17. SALES VARIANCE*
Budget: 5,000 @ $20. Actual: 6,000 @ $19.
Sales Price Variance?
A. $1,000 F B. $6,000 U C. $1,000 U D. $6,000 F
*Ans: B. $6,000 U*
_Exp: [19-20] × 6,000 = 6,000 U_
*Q18. VOH EFFICIENCY VARIANCE*
Std VOH $3/DLH. Std 2 DLH/unit. Actual 11,000 DLH for 5,000 units.
VOH Eff Var?
A. $3,000 F B. $3,000 U C. $2,000 F D. $2,000 U
*Ans: B. $3,000 U*
_Exp: Std hrs = 10,000. [11,000-10,000]×3 = 3,000 U_
*Q19. 3-WAY FOH VARIANCE*
Budget FOH $60,000. Actual $63,000. Applied $58,000.
Spending Variance?
A. $3,000 U B. $2,000 U C. $5,000 U D. $1,000 F
*Ans: A. $3,000 U*
_Exp: Actual - Budget = 63,000 - 60,000_
*Q20. ROI vs RI*
Division: Income $300,000, Assets $2M, Required return 10%.
RI?
A. $100,000 B. $200,000 C. $300,000 D. $500,000
*Ans: A. $100,000*
_Exp: 300,000 - [2,000,000×10%] = 100,000_
*Q21. TRANSFER PRICING*
Selling division has excess capacity. VC $15. Market $40.
Minimum transfer price?
A. $40 B. $15 C. $27.50 D. $0
*Ans: B. $15*
*Q22. EPS*
NI $600,000. 100,000 shares. 20% stock dividend.
EPS after dividend?
A. $6.00 B. $5.00 C. $4.00 D. $7.20
*Ans: B. $5.00*
_Exp: 120,000 shares. 600,000/120,000_
*Q23. LEARNING CURVE*
80% learning curve. First unit 100 hrs. Time for 2nd unit?
A. 80 hrs B. 90 hrs C. 70 hrs D. 100 hrs
*Ans: A. 80 hrs*
*Q24. INTEGRATED REPORTING*
Which is NOT a capital in Integrated Reporting Framework?
A. Financial B. Human C. Marketing D. Natural
*Ans: C. Marketing*
*Q25. AUDITOR'S OPINION*
Disclaimer of opinion is issued when?
A. Material misstatement B. Scope limitation
C. Both A and B D. Clean FS
*Ans: C. Both A and B*
US CMA PART 1 - 50 OBJECTIVE TYPE QUESTIONS
_Mixed Format: T/F, MCQ, Fill in blanks, Assertion-Reason, Odd One Out_
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*SECTION A: TRUE / FALSE [1 Mark Each]*
1. *T/F*: A short term loan refinanced on a long term basis after year end can be treated as non-current liability.
*Ans: TRUE* - If refinancing agreement exists before FS issue date.
2. *T/F*: In JIT system, large batch sizes are maintained to reduce setup cost.
*Ans: FALSE* - JIT focuses on small batch sizes and zero inventory.
3. *T/F*: Under equity method, dividend received increases the investment account.
*Ans: FALSE* - Dividend decreases investment account.
4. *T/F*: A favorable labor efficiency variance means actual hours < standard hours.
*Ans: TRUE*
5. *T/F*: In cash flow statement, purchase of HTM investment is an operating activity.
*Ans: FALSE* - It is an Investing activity.
6. *T/F*: Unrealized profit in ending inventory of subsidiary must be eliminated in consolidation.
*Ans: TRUE*
7. *T/F*: Cash equivalents must have maturity of more than 3 months from date of purchase.
*Ans: FALSE* - Must be ≤ 3 months.
8. *T/F*: Benchmarking compares company's performance with best in industry.
*Ans: TRUE*
9. *T/F*: Overapplied overhead means actual overhead < applied overhead.
*Ans: TRUE*
10. *T/F*: Other Comprehensive Income is closed to Retained Earnings at year end.
*Ans: FALSE* - It is part of Equity, not closed to RE directly.
*SECTION B: ODD MAN OUT [1 Mark Each]*
11. *Odd One Out*: MRP, MRP II, KANBAN, KAIZAN, FIFO
*Ans: FIFO* - Others are production/inventory control systems.
12. *Odd One Out*: Financial, Customer, Internal Process, Stakeholder, Learning & Growth
*Ans: Stakeholder* - Others are 4 perspectives of BSC.
13. *Odd One Out*: Direct Material, Direct Labor, Sales Commission, Manufacturing OH
*Ans: Sales Commission* - Others are product costs.
14. *Odd One Out*: Cost Tracing, Cost Allocation, Cost Apportionment, Cost Reduction
*Ans: Cost Reduction* - Others are methods of assigning costs.
15. *Odd One Out*: Trading Investment, AFS, HTM, Equity Method Investment
*Ans: Equity Method Investment* - Others are debt/equity securities at FV.
*SECTION C: FILL IN THE BLANKS [1 Mark Each]*
16. *Fill*: *_*___ is the method used to allocate service dept costs to production depts.
*Ans: Reapportionment*
17. *Fill*: *_*___ cost is the cost incurred before split-off point in joint product process.
*Ans: Joint Cost*
18. *Fill*: The 5 components of internal control as per COSO are: Control Environment, Risk Assessment, *_*_, Information & Communication, Monitoring.
*Ans: Control Activities*
19. *Fill*: *_*___ variance arises due to difference between actual price and standard price.
*Ans: Material Price Variance*
20. *Fill*: Segment reporting is required when a segment's revenue is ≥ ____% of total revenue.
*Ans: 10%*
*SECTION D: NEGATIVE / "LEAST" / "NOT" TYPE [1 Mark Each]*
21. *Which is NOT a capital lease criteria?*
A. Ownership transfer B. Lease term 90% of life C. PV 80% of FV D. BPO
*Ans: C*
22. *Which is NOT a cash equivalent?*
A. Treasury bills 90 days B. Commercial paper 60 days
C. Money market fund D. Corporate bond 6 months
*Ans: D*
23. *Which is LEAST likely to be a stakeholder?*
A. Customer B. Supplier C. Competitor D. Employee
*Ans: C*
24. *Which is NOT part of conversion cost?*
A. Direct Labor B. Variable MOH C. Fixed MOH D. Direct Material
*Ans: D*
25. *Which variance is NOT calculated in 3-way FOH analysis?*
A. Spending B. Efficiency C. Volume D. Price
*Ans: D*
*SECTION E: ASSERTION-REASON [1 Mark Each]*
_Options: A. Both A&R true, R explains A | B. Both true, R not explain | C. A true, R false | D. A false, R true_
26. *A*: Under absorption costing, fixed MOH is part of product cost.
*R*: Variable costing treats fixed MOH as period cost.
*Ans: B*
27. *A*: Deferred tax liability arises when tax depreciation > book depreciation.
*R*: It results in higher tax payable in future.
*Ans: A*
28. *A*: Inflation increases value of FIFO ending inventory.
*R*: FIFO uses latest prices for ending inventory.
*Ans: A*
*SECTION F: STANDARD MCQs [1 Mark Each]*
29. *Production Budget*: Sales 50,000, Beg FG 5,000, Desired End 8,000. Production?
A. 47,000 B. 53,000 C. 55,000 D. 63,000
*Ans: B. 53,000*
30. *Flexible Budget*: At 10,000 units cost $80,000. VC $5/unit. Cost at 12,000 units?
A. $90,000 B. $96,000 C. $100,000 D. $86,000
*Ans: A. $90,000* _Exp: FC=30k, VC=60k. New=30k+60k_
31. *Impairment*: CV $500k, FV $420k, VIU $450k. Loss?
A. $50,000 B. $80,000 C. $30,000 D. $0
*Ans: A. $50,000*
32. *Consolidation*: Parent 70% Sub. NCI % = ?
A. 30% B. 70% C. 100% D. 0%
*Ans: A. 30%*
33. *Revenue Recog*: $36,000 for 3 year warranty. Revenue in Year 1?
A. $36,000 B. $12,000 C. $18,000 D. $0
*Ans: B. $12,000*
34. *Investment in Associate*: 40% stake. Associate profit $200k. Investor's share?
A. $200k B. $80k C. $120k D. $0
*Ans: B. $80k*
35. *Intercompany elimination*: Parent owes Sub $30,000. Elimination entry?
A. Dr AP Cr AR B. Dr AR Cr AP C. Dr Sales Cr COGS D. No entry
*Ans: A*
36. *DTL*: Temporary difference $100,000. Tax rate 25%. DTL?
A. $25,000 B. $75,000 C. $100,000 D. $0
*Ans: A. $25,000*
37. *Allocation Base*: Best base for allocating factory rent?
A. DLH B. Sq ft C. # of employees D. Machine hrs
*Ans: B. Sq ft*
38. *Job Costing*: DM 2k, DL 3k, MOH 200% of DL. Total?
A. $5,000 B. $9,000 C. $11,000 D. $8,000
*Ans: C. $11,000*
39. *Underapplied OH $8,000*. Journal entry?
A. Dr COGS 8k B. Cr COGS 8k C. Dr MOH 8k D. No entry
*Ans: A*
40. *Overcosting occurs when*:
A. Product uses few resources but gets more cost
B. Product uses many resources but gets less cost
C. Actual > Budget D. None
*Ans: A*
41. *Sales Volume Variance*: Budget 10k @ $50, Actual 11k @ $50.
A. $5,000 F B. $5,000 U C. $0 D. $50,000 F
*Ans: A. $5,000 F*
42. *VOH Eff Var*: Std 1 DLH/unit @ $4. Actual 5,500 hrs for 5,000 units.
A. $2,000 F B. $2,000 U C. $22,000 U D. $20,000 F
*Ans: B. $2,000 U*
43. *FOH Spending Var*: Budget $50k, Actual $54k.
A. $4,000 F B. $4,000 U C. $54,000 U D. $50,000 F
*Ans: B. $4,000 U*
44. *ROI*: Income $250k, Assets $1.25M. ROI?
A. 10% B. 20% C. 25% D. 5%
*Ans: B. 20%*
45. *RI*: Above data, required return 15%.
A. $62,500 B. $250,000 C. $187,500 D. $100,000
*Ans: A. $62,500* _Exp: 250k - 187.5k_
46. *Transfer Pricing*: No excess capacity, Market $60, VC $25. Min TP?
A. $25 B. $60 C. $42.50 D. $0
*Ans: B. $60*
47. *EPS*: NI $800k, Pref Div $100k, 140k shares.
A. $5.00 B. $6.43 C. $5.71 D. $8.00
*Ans: B. $6.43* _Exp: 700k/140k_
48. *Stock Dividend*: 10% stock dividend. Effect?
A. Dr RE Cr Cash B. Dr RE Cr Common Stock
C. Dr Cash Cr RE D. No entry
*Ans: B*
49. *Learning Curve 90%*: Unit 1 = 100hrs. Unit 2 = ?
A. 100 B. 90 C. 81 D. 95
*Ans: B. 90*
50. *EVPI*: With perfect info $50k, Without $35k. EVPI?
A. $15,000 B. $85,000 C. $35,000 D. $50,000
*Ans: A. $15,000*
*REVISION GRID - EXAM TRAPS*
**Topic** **Key Trap**
**Cash Equivalent** ≤ 3 months maturity only
**Consolidation** Eliminate unrealized profit + intercompany balances
**Variances** Favorable = Actual < Std for costs
**DTL vs DTA** Tax > Book = DTL. Tax < Book = DTA
**ROI vs RI** ROI %, RI $ amount
*KEY TAKEAWAYS FOR EXAM*
1. *Cash/Production/Flexible Budget* = Core of Planning
2. *Consolidation + DTL + Impairment* = High weight in Financial Reporting
3. *Variances + ROI/RI + Transfer Pricing* = Performance Measurement
4. *Over/Undercosting* = Always think about cost driver
*BONUS QUICK FORMULAS*
**Topic** **Formula**
**Cash Budget** Beg + Receipts - Payments +/- Borrow
**ROI** Operating Income / Operating Assets
**RI** Income - [Assets × Min Rate]
**EPS** [NI - Pref Dividend] / Wtd Avg Shares
**Transfer Price** VC to Market Price range
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