US CMA–style MCQ questions strictly aligned with US GAAP. Questions are conceptual + tricky, similar to Part 1 exam patterns.
Section A..
Q1. Cash flow after tax is best described as:
A. Net income + depreciation
B. Cash inflows minus cash outflows after income taxes
C. EBIT × (1 − tax rate)
D. Operating cash flow before tax
Answer:
2. Cash Flow from Operating Activities (CFO)
Q2. Under the indirect method, which item is added back to net income?
A. Gain on sale of equipment
B. Increase in accounts receivable
C. Depreciation expense
D. Decrease in accounts payable
Answer:
3. Cash Flow from Investing Activities
Q3. Which of the following is reported as an investing activity?
A. Payment of dividends
B. Issuance of bonds
C. Purchase of machinery
D. Interest paid
Answer:
4. Cash Flow from Financing Activities
Q4. Cash received from issuing common stock is classified as:
A. Operating
B. Investing
C. Financing
D. Non-cash activity
Answer:
5. Closing Cash & Cash Equivalents
Q5. Which item is considered a cash equivalent under US GAAP?
A. 6-month treasury bill
B. 120-day commercial paper
C. Equity securities
D. Restricted cash
Answer:
(≤ 3 months maturity)
Q6. Trading securities are reported at:
A. Cost
B. Lower of cost or market
C. Fair value with unrealized gains in OCI
D. Fair value with unrealized gains in net income
Answer:
7. Held-to-Maturity (HTM) Securities
Q7. HTM debt securities are reported at:
A. Fair value
B. Amortized cost
C. Market value
D. Lower of cost or market
Answer:
8. Available-for-Sale (AFS) Securities
Q8. Unrealized gains on AFS securities are reported in:
A. Net income
B. Retained earnings
C. Other comprehensive income
D. Notes only
Answer:
9. Mortgaged Loan
Q9. A mortgaged loan means:
A. Loan without collateral
B. Loan secured by property
C. Loan payable on demand
D. Loan guaranteed by government
Answer:
10. Earnings Per Share (EPS)
Q10. Basic EPS is calculated as:
A. Net income / outstanding shares
B. Net income − preferred dividends ÷ weighted avg common shares
C. Operating income ÷ shares
D. Net income ÷ diluted shares
Answer:
11. Diluted EPS
Q11. Which instrument causes dilution?
A. Treasury stock
B. Stock options
C. Cash dividends
D. Stock dividends
Answer:
12. Operating Cycle vs Fiscal Period
Q12. Classification of current assets is based on the longer of:
A. 6 months or 1 year
B. Operating cycle or fiscal year
C. Cash cycle or accounting period
D. Budget year or operating cycle
Answer:
13. Inventory Valuation
Q13. Ending inventory is valued at:
A. Cost only
B. Market only
C. Lower of cost or market
D. Higher of cost or NRV
Answer:
14. Allowance for Uncollectible Accounts
Q14. The allowance method recognizes bad debts:
A. When cash is not received
B. When account becomes uncollectible
C. At time of sale
D. Based on estimates
Answer:
15. Credit Loss Recovery
Q15. Recovery of bad debts previously written off is recorded as:
A. Other income
B. Reduction of bad debt expense
C. Increase in allowance
D. Revenue
Answer:
16. Impairment Loss
Q16. Asset impairment loss occurs when:
A. Carrying value > fair value
B. Undiscounted cash flows < carrying value
C. Discounted cash flows < carrying value
D. Market price declines
Answer:
17. Accumulated Depreciation
Q17. Accumulated depreciation is classified as:
A. Asset
B. Liability
C. Contra-asset
D. Expense
Answer:
18. Temporary Difference
Q18. Which creates a temporary difference?
A. Fines & penalties
B. Tax-exempt interest
C. Depreciation method difference
D. Meals expense disallowed
Answer:
19. Permanent Difference
Q19. Which creates a permanent difference?
A. Warranty provision
B. Accelerated depreciation
C. Tax-exempt municipal bond interest
D. Unearned revenue
Answer:
20. Deferred Tax Expense
Q20. Deferred tax expense appears in:
A. Balance sheet
B. Statement of cash flows
C. Income statement
D. OCI
Answer:
21. Indirect Method – CFO
Q21. Increase in prepaid expenses under indirect method:
A. Added
B. Deducted
C. Ignored
D. Financing
Answer:
22. Age-wise Analysis of Trade Receivables
Q22. Aging analysis is primarily used to estimate:
A. Revenue
B. Cash flow
C. Bad debt allowance
D. Sales growth
Answer:
23. Factoring Without Recourse
Q23. Factoring without recourse means:
A. Seller retains risk
B. Buyer retains risk
C. Factor assumes credit risk
D. It is a loan
Answer:
24. Operating Lease
Q24. Operating lease payments are recorded as:
A. Asset & liability
B. Expense only
C. Financing activity
D. OCI
Answer:
25. Finance (Capital) Lease Criteria
Q25. Which indicates a finance lease?
A. Lease term < 75% of asset life
B. No bargain purchase option
C. Transfer of ownership at end
D. Cancelable lease
Answer:
26. Off-Balance Sheet Financing
Q26. Operating leases are considered:
A. On-balance sheet financing
B. Off-balance sheet financing
C. Equity financing
D. Cash financing
Answer:
27. FIFO vs LIFO
Q27. During rising prices, FIFO results in:
A. Higher COGS
B. Lower inventory
C. Higher net income
D. Lower tax
Answer:
28. FOB Destination
Q28. Under FOB destination, ownership transfers:
A. At shipment
B. At factory
C. At delivery
D. At billing
Answer:
29. Annual Cash Dividend
Q29. Cash dividend declaration creates:
A. Expense
B. Liability
C. Equity increase
D. Revenue
Answer:
30. Stock Dividend
Q30. Stock dividends result in:
A. Increase in total equity
B. Decrease in equity
C. Reclassification within equity
D. Cash outflow
Answer:
31. Internal Stakeholders
Q31. Which is an internal stakeholder?
A. Supplier
B. Customer
C. Employee
D. Government
Answer:
32. Other Comprehensive Income (OCI)
Q32. Which item is reported in OCI?
A. Net profit
B. Unrealized gain on AFS securities
C. Dividend income
D. Interest income
Answer:
33. Deferred Tax Asset (DTA)
Q33. Deferred tax assets arise when:
A. Accounting income > taxable income
B. Taxable income > accounting income
C. Permanent differences exist
D. Taxes are unpaid
Answer:
34. Deferred Tax Liability (DTL)
Q34. Accelerated tax depreciation creates:
A. DTA
B. DTL
C. OCI
D. Equity reserve
Answer:
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Section B…
NUMERICAL MCQs exactly in US CMA Part 1 exam style, focused on conceptual traps, mixed adjustments, and examiner favorites.
1. CFO – Indirect Method (Multiple Traps)
Net income (after tax) = $120,000
Additional data:
• Depreciation expense = $25,000
• Gain on sale of equipment = $8,000
• Accounts receivable ↑ $12,000
• Inventory ↓ $6,000
• Prepaid expenses ↑ $4,000
• Accounts payable ↓ $5,000
Cash flow from operations = ?
A. $122,000
B. $132,000
C. $118,000
D. $150,000
✅ Answer:
2. Cash Flow After Tax (Exam Favorite)
Operating income = $200,000
Tax rate = 30%
Depreciation = $40,000
Cash flow after tax = ?
A. $140,000
B. $154,000
C. $180,000
D. $200,000
✅ Answer:
3. Investing vs Operating Trap
Company sold land for $90,000.
Book value = $65,000.
Effect on CFO (indirect method)?
A. +$90,000
B. −$65,000
C. −$25,000
D. +$25,000
✅ Answer:
4. Depreciation vs Accumulated Depreciation
Asset cost = $300,000
Accumulated depreciation at beginning = $90,000
Depreciation for year = $30,000
Ending book value = ?
A. $210,000
B. $180,000
C. $150,000
D. $120,000
✅ Answer:
5. Deferred Tax Liability – Numerical Trap
Accounting depreciation = $40,000
Tax depreciation = $70,000
Tax rate = 25%
Deferred tax effect = ?
A. DTA $7,500
B. DTL $7,500
C. DTA $10,000
D. DTL $10,000
✅ Answer:
6. Inventory LIFO vs FIFO – Rising Prices
FIFO COGS = $380,000
LIFO COGS = $420,000
Tax rate = 30%
Difference in net income (FIFO − LIFO)?
A. $40,000
B. $28,000
C. $12,000
D. $20,000
✅ Answer:
7. EPS vs Diluted EPS (Options)
Net income = $500,000
Preferred dividends = $50,000
Weighted avg shares = 100,000
Options outstanding = 20,000 (treasury stock method adds 8,000 shares)
Diluted EPS = ?
A. $4.50
B. $4.25
C. $4.09
D. $4.00
✅ Answer:
8. Factoring Without Recourse
Receivables factored = $200,000
Cash received = $190,000
Loss on factoring = ?
A. $0
B. $10,000
C. $190,000
D. $200,000
✅ Answer:
9. Operating Cycle Trap
Inventory period = 260 days
Receivable period = 140 days
Classification period for current assets = ?
A. 365 days
B. 400 days
C. 260 days
D. Fiscal year only
✅ Answer:
10. Lease Classification Numerical
Asset life = 10 years
Lease term = 8 years
PV of lease payments = 92% of fair value
Lease classification?
A. Operating lease
B. Short-term lease
C. Finance lease
D. Sale-leaseback
✅ Answer:
11. OCI vs Net Income Trap
AFS security cost = $100,000
Fair value end = $120,000
Unrealized gain reported where?
A. Net income $20,000
B. OCI $20,000
C. Retained earnings $20,000
D. Cash flow statement
✅ Answer:
12. Allowance Method – Aging
Total receivables = $500,000
Estimated uncollectible = 4%
Existing allowance = $12,000
Bad debt expense = ?
A. $8,000
B. $20,000
C. $32,000
D. $12,000
✅ Answer:
🔑 CMA EXAM STRATEGY
• Indirect CFO = Net income ± non-cash ± WC
• Temporary difference → Deferred tax
• Gains always reversed in CFO
• AFS → OCI, Trading → Net Income
• FIFO boosts profit in inflation
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