**US CMA Part 1: Financial Statements MCQs (US GAAP Focus)**
US CMA Part 1 Section A emphasizes financial statements under US GAAP, including recognition and presentation. Here are 50 challenging, illustration-based MCQs with answers on specified topics like income statement components, equity changes, assets, theories, and principles.
### Income Statement & Components (10 MCQs)
1. Illustration: Sales $1,000K, COGS $600K, OpExp $250K, Interest $50K, Tax 25%. Gross profit=
A. $400K
B. $150K
C. $100K
D. $350K
**Answer:
2. Net income excludes:
A. Operating income
B. OCI items like unrealized AFS gains
C. Finance costs
D. Tax expense
**Answer:
3. Prior period adjustment (error correction) affects:
A. Current income
B. Retained earnings directly
C. OCI
D. Dividends
**Answer:
4. Finance costs (interest) classified as:
A. Operating expense
B. Non-operating below EBIT
C. Equity reduction
D. Asset addition
**Answer:
5. Comprehensive income = Net income +
A. Dividends
B. OCI
C. Prior adjustments
D. Gross profit
**Answer:
6. Illustration: NI $200K, OCI -$30K (pension adj). Comprehensive income=
A. $200K
B. $170K
C. $230K
D. $30K loss
**Answer:
7. Gross profit margin = Gross profit / Sales × 100. If GP $400K, Sales $1M:
A. 40%
B. 60%
C. 50%
D. 30%
**Answer:
8. Operating income excludes:
A. Sales
B. Gain on sale of equipment
C. Salaries
D. Depr
**Answer:
9. Illustration: Rev $800K, Exp $700K inc $100K finance. NI before tax=
A. $100K
B. $0
C. $200K
D. Finance excluded
**Answer:
10. discontinued operations shown:
A. In operating income
B. Net of tax, separate
C. OCI
D. RE adj
**Answer:
### SOCIE & Equity (10 MCQs)
11. SOCIE starts with:
A. Net income
B. Cash flows
C. Assets
D. Dividends
**Answer:
12. Equity dividend (cash): Reduces
A. Common stock
B. Retained earnings
C. OCI
D. Assets only
**Answer:
13. Property dividend: Recorded at
A. Book value of asset
B. Fair value, gain recognized
C. Par value
D. Cost
**Answer:
14. Stock split 2:1 on 100K shares $10 par: New shares/par
A. 200K/$5
B. 100K/$20
C. 200K/$10
D. No change
**Answer:
15. Stock dividend 10% on 1M shares: EPS weighted avg adjusts as if from
A. Declaration date
B. Beginning of year
C. Payment date
D. Year-end
**Answer:
16. Preference dividend: For EPS, subtracted from NI for
A. Basic EPS numerator
B. Diluted only if convertible
C. OCI
D. Not subtracted
**Answer:
17. Illustration: RE beg $500K, NI $100K, cash div $40K, stock div 5%. RE end=
A. $560K
B. $600K
C. $500K
D. $560K - stock
**Answer:
18. OCI reclass: Pension gain realized moves to
A. NI
B. Permanent OCI
C. RE
D. Dividends
**Answer:
19. SOCIE illustration: NI $300K, OCI $50K, div $80K, treasury retire $20K. Ending equity inc=
A. $250K
B. $300K
C. $370K
D. $250K net
**Answer:
20. Prior period adj for overdepr: Increases
A. Current NI
B. RE
C. OCI
D. Assets
**Answer:
### Balance Sheet & Assets (10 MCQs)
21. Accumulated depreciation: Contra to
A. Current assets
B. PPE
C. Intangibles
D. Inventory
**Answer:
22. Amortization for finite intangibles similar to
A. Depreciation
B. Inventory turnover
C. Current liab
D. Equity
**Answer:
23. Wasting assets (natural resources): Depletion like
A. Units-of-production depr
B. Straight-line
C. Declining
D. No depr
**Answer:
24. Livestock: Raised for sale valued at
A. Lower of cost/market
B. NRV
C. Historical cost
D. Fair value
**Answer:
25. Long-lived assets include
A. Cash
B. PPE, intangibles >1yr
C. AR
D. Inventory
**Answer:
26. Current assets: Settled within
A. Operating cycle or 1yr
B. 2 yrs
C. Indefinite
D. Sale only
**Answer:
27. Illustration: PPE cost $1M, acc depr $400K, impairment test fail, RV $500K. Write-down=
A. $100K
B. $400K
C. $600K
D. $100K loss
**Answer:
28. Non-current assets exclude
A. Long-term investments
B. Deferred tax assets
C. Inventory
D. Goodwill
**Answer:
29. Balance sheet eq: Assets = Liab +
A. RE
B. Equity
C. NI
D. OCI
**Answer
30. Amortization period: Patent max
A. Legal life 20yrs
B. Useful life or 20yrs
C. Indefinite
D. 40yrs
**Answer
### EPS & Diluted EPS (5 MCQs)
31. Basic EPS = (NI - pref div) / Weighted avg shares. Illustration: NI $500K, pref $50K, 100K shares + 10K midyr. EPS=
A. $4.50
B. $4.09
C. $5.00
D. $4.55
**Answer:
32. Diluted EPS considers
A. Only basic
B. Potential common shares (options, convertibles)
C. Pref only
D. Treasury
**Answer
33. Convertible bonds dilutive: Add back
A. Interest net tax
B. Principal
C. Pref div
D. No change
**Answer:
34. Antidilutive securities:
A. Included in diluted
B. Excluded
C. Increase EPS
D. Basic only
**Answer:
35. Stock options: Treasury method assumes proceeds buy shares at
A. Avg mkt price
B. Exercise price
C. Par
D. End price
**Answer:
### Theories & Concepts/Conventions/Principles (15 MCQs)
36. Proprietor theory: Equity as
A. Owner's investment
B. Entity claim
C. Creditor residual
D. Govt stake
**Answer:
37. Entity theory: Owners as
A. Residual claimants
B. Creditors like
C. Controllers
D. Separate
**Answer:
38. Residuary theory (funds): Focus on
A. Entity funds
B. Owner equity
C. Income
D. Assets
**Answer:
39. Capital maintenance theory: Physical or
A. Financial
B. Both
C. Nominal
D. Real
**Answer:
40. Business entity concept:
A. Owner = business
B. Separate entities
C. Combined
D. Proprietor only
**Answer:
41. Going concern convention assumes
A. Liquidation
B. Continuity
C. Short-term
D. Sale
**Answer:
42. Historical cost principle: Assets at
A. Fair value
B. Acquisition cost
C. NRV
D. Replacement
**Answer:
43. Matching principle: Expenses with
A. Next period
B. Related revenues
C. Cash
D. Assets
**Answer
44. Revenue recognition: When
A. Cash received
B. Earned/performance
C. Invoiced
D. Shipped
**Answer:
45. Conservatism (prudence):
A. Anticipate profits
B. Losses yes, gains no
C. Equal
D. Ignore
**Answer:
46. Materiality principle: Disclose if
A. All
B. Influences decisions
C. Small
D. Internal
**Answer:
47. Full disclosure convention:
A. Notes + statements
B. Minimal
C. Verbal
D. None
**Answer:
48. Time period assumption:
A. Indefinite
B. Artificial periods
C. Event-based
D. Cycle
**Answer:
49. Monetary unit assumption:
A. Stable dollars
B. Inflation adj
C. Foreign
D. Barter
**Answer:
50. Consistency principle: Same methods
A. Yearly change
B. Period to period
C. New GAAP
D. Mgmt choice
**Answer:
