CMA Part 1 MCQs (Financial Reporting & Analysis – US GAAP)
Section A
MCQs – CMA PART 1
1.
A company reports accelerated tax depreciation and straight-line book depreciation. This will MOST likely result in:
C. Permanent Difference
D. No tax effect
Answer:
2.
All of the following create Deferred Tax Assets EXCEPT:
A. Warranty accrual
B. Unearned revenue (taxed when received)
C. Installment sales for tax
D. Litigation accrual probable
Answer:
3.
If an asset fails recoverability test under US GAAP, impairment loss equals:
A. Carrying value − Undiscounted CF
B. Undiscounted CF − Fair value
C. Carrying value − Fair value
D. Fair value − Carrying value
Answer:
4.
Which is LEAST likely included in OCI?
A. Pension adjustments
B. Unrealized gain on AFS securities
C. Foreign currency translation
D. Gain on sale of PPE
Answer:
5.
Finance lease classification requires meeting:
A. All criteria
B. Majority of criteria
C. At least one criterion
D. PV ≥ 75% only
Answer:
6.
Factoring without recourse should be accounted for as:
A. Secured borrowing
B. Liability recognition
C. Sale of receivable
D. Deferred revenue
Answer:
7.
Lower of Cost or Market floor equals:
A. NRV
B. Replacement cost
C. NRV − Normal profit margin
D. Historical cost
Answer:
8.
Change in depreciation method is treated as:
A. Prior period adjustment
B. Change in estimate
C. Change in principle retrospective
D. Error correction
Answer:
9.
Discontinued operations are reported:
A. Gross of tax
B. Before extraordinary items
C. Net of tax
D. In OCI
Answer:
10.
Bond issued at discount will:
A. Decrease interest expense over time
B. Increase interest expense over time
C. Keep interest expense constant
D. Reduce cash paid
Answer:
11.
A DTA requires valuation allowance when realization is:
A. Possible
B. Probable
C. More likely than not not realizable
D. Remote
Answer:
12.
Which is NOT cash equivalent?
A. 90-day T-bill
B. 2-month commercial paper
C. 6-month certificate of deposit
D. Demand deposit
Answer:
13.
Under indirect method, gain on sale of equipment is:
A. Added
B. Deducted
C. Ignored
D. OCI
Answer:
14.
Permanent differences affect:
A. Deferred tax
B. Effective tax rate
C. Temporary difference
D. DTL only
Answer:
15.
Operating lease under ASC 842 results in:
A. No liability recorded
B. ROU asset and lease liability
C. Only expense recognition
D. Off-balance sheet
Answer:
16.
Which theory treats preferred shareholders similar to liability?
A. Proprietary
B. Entity
C. Residual
D. Fund
Answer:
17.
R&D costs under US GAAP are:
A. Capitalized
B. Deferred
C. Expensed
D. OCI
Answer:
18.
Software costs are capitalized after:
A. Production
B. Feasibility
C. Sale
D. Research
Answer:
19.
Which increases current ratio?
A. Pay accounts payable
B. Buy inventory cash
C. Issue long-term debt
D. Purchase PPE credit
Answer:
20.
Gross profit margin increases when:
A. COGS increases proportionally
B. Sales decrease
C. Sales grow faster than COGS
D. Operating expense decreases
Answer:
21.
A purchase commitment loss is recognized when:
A. Contract signed
B. Market price < contract price
C. Goods delivered
D. Payment made
Answer:
22.
Which affects CFO under indirect method?
A. Dividend paid
B. Gain on bond retirement
C. Increase in inventory
D. Issue stock
Answer:
23.
OCI items are accumulated in:
A. Retained earnings
B. AOCI
C. APIC
D. Current income
Answer:
24.
Times interest earned uses:
A. Net income
B. EBIT
C. EBITDA
D. CFO
Answer:
25.
If tax rate increases after DTL recorded:
A. Decrease DTL
B. Increase DTL
C. No effect
D. OCI adjustment
Answer:
26.
Which is LEAST relevant for liquidity?
A. Current ratio
B. Quick ratio
C. Debt-to-equity
D. OCF ratio
Answer:
27.
Inventory write-down under LCM:
A. Reversed later
B. Permanent under GAAP
C. OCI
D. Deferred
Answer:
28.
Interest paid classified as:
A. Investing
B. Financing
C. Operating
D. OCI
Answer:
29.
Deferred revenue taxed when received creates:
A. DTL
B. DTA
C. Permanent difference
D. No difference
Answer:
30.
Impairment reversal allowed for:
A. Held for use assets
B. Goodwill
C. Assets held for sale
D. PPE
Answer:
31.
Financial capital maintenance measures profit based on:
A. Physical output
B. Net asset increase
C. Sales growth
D. Cash flow
Answer:
32.
Warranty expense creates:
A. Permanent difference
B. Temporary deductible difference
C. OCI
D. Equity reserve
Answer:
33.
Which reduces operating cash flow?
A. Increase in AP
B. Increase in AR
C. Depreciation
D. Impairment
Answer:
34.
Operating lease expense pattern is:
A. Front-loaded
B. Constant
C. Increasing
D. Zero
Answer:
35.
Bond premium amortization:
A. Increases carrying value
B. Decreases interest expense
C. Increases interest expense
D. No effect
Answer:
36.
Extraordinary items are:
A. Separate line item
B. In OCI
C. Not allowed separately
D. Prior period
Answer:
37.
Leverage ratio MOST directly measures:
A. Profitability
B. Liquidity
C. Long-term solvency
D. Efficiency
Answer:
38.
Installment sales for tax vs accrual for books creates:
A. DTL
B. DTA
C. Permanent
D. No effect
Answer:
39.
Retained earnings is reduced by:
A. Net income
B. Dividends
C. OCI gain
D. Share issuance
Answer:
40.
Which increases ROE?
A. Increase equity proportionately
B. Higher leverage with same income
C. Lower net income
D. Higher assets
Answer:
41.
Factoring with recourse results in:
A. Sale only
B. Liability recognition
C. No entry
D. Deferred tax
Answer:
42.
NRV equals:
A. Selling price − disposal cost
B. Replacement cost
C. Cost − margin
D. Fair value
Answer:
43.
Deferred tax is classified as:
A. Current only
B. Noncurrent only
C. Split
D. OCI
Answer:
44.
A strategic shift qualifies as:
A. OCI
B. Discontinued operations
C. Extraordinary
D. Error
Answer:
45.
Which MOST affects gross profit?
A. SG&A expense
B. Interest
C. COGS
D. Tax expense
Answer:
46.
Cash dividend paid classified as:
A. Operating
B. Investing
C. Financing
D. OCI
Answer:
47.
Debt ratio increases when:
A. Assets increase more than debt
B. Debt increases more than assets
C. Equity increases
D. Income increases
Answer:
48.
Which creates permanent difference?
A. Depreciation difference
C. Warranty accrual
D. Installment sale
Answer:
49.
Right-of-use asset amortization for finance lease appears in:
A. COGS
B. Depreciation expense
C. Interest expense
D. OCI
Answer:
50.
Comprehensive income includes:
A. Net income only
B. OCI only
C. Net income + OCI
D. Retained earnings
Answer:
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Section B…
CMA Part 1 MCQs
🔥 Advanced CMA-Style MCQs
1.
All of the following create a Deferred Tax Liability under US GAAP EXCEPT:
A. Accelerated tax depreciation
B. Installment sales taxed later
C. Revenue recognized for books before tax
D. Warranty expense accrued for books
Answer:
2.
Which of the following is the MOST correct statement regarding Deferred Tax Assets?
A. They always increase net income
B. They arise from permanent differences
C. They represent future deductible amounts
D. They are recorded only if certain
Answer:
3.
All of the following are included in Other Comprehensive Income EXCEPT:
A. Foreign currency translation adjustments
B. Unrealized gains on AFS securities
C. Pension adjustments
D. Gain on sale of equipment
Answer:
4.
Which of the following is LEAST appropriate when testing long-lived assets for impairment?
A. Compare carrying value with undiscounted cash flows
B. Measure loss as carrying value minus fair value
C. Reverse impairment if value recovers
D. Perform recoverability test first
Answer:
5.
All of the following are criteria for finance lease classification EXCEPT:
A. Ownership transfers
B. Lease term is major part of economic life
C. PV equals 50% of fair value
D. Bargain purchase option exists
Answer:
6.
Which of the following is the MOST correct treatment of R&D costs under US GAAP?
A. Capitalize all development costs
B. Expense as incurred
C. Record in OCI
D. Defer and amortize
Answer:
7.
All of the following affect operating cash flow under indirect method EXCEPT:
A. Increase in accounts receivable
B. Depreciation expense
C. Dividend paid
D. Increase in accounts payable
Answer:
8.
Which of the following is LEAST relevant in evaluating short-term liquidity?
A. Current ratio
B. Quick ratio
C. Debt-to-equity ratio
D. Operating cash flow ratio
Answer:
9.
All of the following are permanent differences EXCEPT:
A. Municipal bond interest
B. Life insurance proceeds
C. Depreciation timing differences
D. Fines and penalties
Answer:
10.
Which of the following is MOST correct regarding discontinued operations?
A. Reported gross of tax
B. Included in OCI
C. Reported net of tax
D. Treated as extraordinary
Answer:
11.
All of the following are included in Cash Equivalents EXCEPT:
A. 3-month Treasury bill
B. Demand deposit
C. 6-month term deposit
D. Commercial paper maturing in 60 days
Answer:
12.
Which of the following is LEAST appropriate when amortizing bond discount?
A. Use effective interest method
B. Increase interest expense
C. Decrease carrying value over time
D. Increase carrying value toward face
Answer:
13.
All of the following increase ROE EXCEPT:
A. Higher leverage with same income
B. Increased net income
C. Increase equity without income change
D. Share buyback
Answer:
14.
Which of the following is the MOST correct statement about valuation allowance?
A. Recorded when realization is remote
B. Reduces Deferred Tax Liability
C. Reduces Deferred Tax Asset
D. Recorded in OCI
Answer:
15.
All of the following reduce retained earnings EXCEPT:
A. Dividends
B. Net loss
C. OCI loss
D. Share issuance
Answer:
16.
Which of the following is LEAST appropriate in applying Lower of Cost or Market?
A. Market ceiling equals NRV
B. Floor equals NRV minus normal profit
C. Replacement cost defines market
D. Reversal allowed if value recovers
Answer:
17.
All of the following are characteristics of Operating Lease under ASC 842 EXCEPT:
A. Single lease expense pattern
B. ROU asset recorded
C. Lease liability recorded
D. Interest expense shown separately
Answer:
18.
Which of the following is MOST correct regarding financial capital maintenance?
A. Focuses on physical output
B. Profit equals increase in net assets
C. Ignores equity
D. Based on replacement cost
Answer:
19.
All of the following increase Debt-to-Equity ratio EXCEPT:
A. Issuing bonds
B. Recording net loss
C. Repurchasing shares
D. Issuing common stock
Answer:
20.
Which of the following is LEAST appropriate when accounting for warranty liabilities?
A. Recognize if probable
B. Estimate reasonably
C. Recognize when paid
D. Record as expense in sale period
Answer:
21.
All of the following create Deferred Tax Assets EXCEPT:
A. Warranty accrual
B. Litigation accrual
C. Revenue taxed before book recognition
D. Accelerated tax depreciation
Answer:
22.
Which of the following is MOST correct about factoring without recourse?
A. Record liability
B. Treat as secured borrowing
C. Recognize sale and possible loss
D. Defer revenue
Answer:
23.
All of the following affect Gross Profit EXCEPT:
A. Sales
B. COGS
C. Interest expense
D. Inventory write-down
Answer:
24.
Which of the following is LEAST appropriate regarding impairment losses?
A. Report in income statement
B. Reverse for assets held for use
C. Recognize when not recoverable
D. Measure using fair value
Answer:
25.
All of the following are financing activities EXCEPT:
A. Debt issuance
B. Dividend payment
C. Share repurchase
D. Purchase of equipment
Answer:
26.
Which of the following is MOST correct regarding OCI?
A. Included in retained earnings directly
B. Accumulated in AOCI
C. Ignored in equity
D. Included in operating income
Answer:
27.
All of the following reduce current ratio EXCEPT:
A. Paying accounts payable
B. Purchasing inventory with cash
C. Recording net income
D. Short-term borrowing
Answer:
28.
Which of the following is LEAST appropriate for evaluating solvency?
A. Debt ratio
B. Times interest earned
C. Current ratio
D. Debt-to-equity
Answer:
29.
All of the following are temporary differences EXCEPT:
A. Installment sale timing
B. Depreciation differences
C. Municipal bond interest
D. Warranty accrual
Answer:
30.
Which of the following is MOST correct about comprehensive income?
A. Equals retained earnings
B. Includes net income and OCI
C. Includes only unrealized gains
D. Excludes discontinued operations
Answer:
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