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CMA EXAM PRACTICE QUESTIONS 2026-2027:
200 MULTIPLE-CHOICE QUESTIONS WITH
RATIONALES FOR PARTS 1 & 2 | CERTIFIED
MANAGEMENT ACCOUNTANT TEST PREP
PART 1: FINANCIAL PLANNING, PERFORMANCE, AND ANALYTICS
### Section A: External Financial Reporting Decisions
**Question 1**
Which of the following best describes the primary objective of financial reporting according to
the FASB conceptual framework?
A) To provide information that is useful for making investment and credit decisions
B) To maximize the company's reported earnings and stock price
C) To ensure compliance with all tax regulations and reporting requirements
D) To provide detailed information about all internal management decisions
**Correct Answer: A**
**Rationale:** The FASB conceptual framework states that the primary objective of financial
reporting is to provide financial information about the reporting entity that is useful to existing
and potential investors, lenders, and other creditors in making decisions about providing
resources to the entity. Option B is incorrect because financial reporting should be neutral and
not aimed at maximizing earnings. Option C describes tax compliance, which is a secondary
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consideration, not the primary objective. Option D is incorrect because management decisions
are internal and not the focus of external financial reporting.
---
**Question 2**
A company's classified balance sheet reports the following items:
- Accounts payable: $50,000
- Short-term notes payable: $30,000
- Current portion of long-term debt: $20,000
- Accrued expenses: $15,000
- Long-term debt: $100,000
- Deferred tax liability (non-current): $25,000
What is the company's total current liabilities?
A) $65,000
B) $80,000
C) $100,000
D) $115,000
**Correct Answer: D**
**Rationale:** Current liabilities are obligations expected to be settled within one year or the
operating cycle, whichever is longer. Current liabilities include accounts payable ($50,000),
short-term notes payable ($30,000), current portion of long-term debt ($20,000), and accrued
expenses ($15,000). Total current liabilities = $50,000 + $30,000 + $20,000 + $15,000 =
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$115,000. Long-term debt ($100,000) and non-current deferred tax liability ($25,000) are
classified as non-current liabilities.
---
**Question 3**
Which of the following items would be reported as a component of other comprehensive income
(OCI) rather than net income?
A) Gain on sale of equipment
B) Unrealized gain on available-for-sale debt securities
C) Revenue from sales of goods
D) Interest income from investments
**Correct Answer: B**
**Rationale:** Other comprehensive income includes certain gains and losses that are excluded
from net income under US GAAP. Unrealized gains and losses on available-for-sale debt
securities are reported in OCI until realized. Gain on sale of equipment (A) is reported in net
income as part of continuing operations. Revenue from sales (C) and interest income (D) are
both reported in net income.
---
**Question 4**
A company reported net income of $500,000 for the year. Additional information:
- Depreciation expense: $80,000
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- Increase in accounts receivable: $25,000
- Decrease in inventory: $15,000
- Increase in accounts payable: $20,000
- Gain on sale of equipment: $10,000
Using the indirect method, what is the net cash provided by operating activities?
A) $500,000
B) $540,000
C) $580,000
D) $620,000
**Correct Answer: C**
**Rationale:** Under the indirect method, net cash from operating activities starts with net
income and adjusts for non-cash items and changes in working capital accounts:
Net income: $500,000
+ Depreciation (non-cash): $80,000
- Increase in A/R: ($25,000)
+ Decrease in inventory: $15,000
+ Increase in A/P: $20,000
- Gain on sale of equipment: ($10,000)
Net cash from operating activities = $500,000 + $80,000 - $25,000 + $15,000 + $20,000 -
$10,000 = $580,000.
---
CMA EXAM PRACTICE QUESTIONS 2026-2027:
200 MULTIPLE-CHOICE QUESTIONS WITH
RATIONALES FOR PARTS 1 & 2 | CERTIFIED
MANAGEMENT ACCOUNTANT TEST PREP
PART 1: FINANCIAL PLANNING, PERFORMANCE, AND ANALYTICS
### Section A: External Financial Reporting Decisions
**Question 1**
Which of the following best describes the primary objective of financial reporting according to
the FASB conceptual framework?
A) To provide information that is useful for making investment and credit decisions
B) To maximize the company's reported earnings and stock price
C) To ensure compliance with all tax regulations and reporting requirements
D) To provide detailed information about all internal management decisions
**Correct Answer: A**
**Rationale:** The FASB conceptual framework states that the primary objective of financial
reporting is to provide financial information about the reporting entity that is useful to existing
and potential investors, lenders, and other creditors in making decisions about providing
resources to the entity. Option B is incorrect because financial reporting should be neutral and
not aimed at maximizing earnings. Option C describes tax compliance, which is a secondary
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consideration, not the primary objective. Option D is incorrect because management decisions
are internal and not the focus of external financial reporting.
---
**Question 2**
A company's classified balance sheet reports the following items:
- Accounts payable: $50,000
- Short-term notes payable: $30,000
- Current portion of long-term debt: $20,000
- Accrued expenses: $15,000
- Long-term debt: $100,000
- Deferred tax liability (non-current): $25,000
What is the company's total current liabilities?
A) $65,000
B) $80,000
C) $100,000
D) $115,000
**Correct Answer: D**
**Rationale:** Current liabilities are obligations expected to be settled within one year or the
operating cycle, whichever is longer. Current liabilities include accounts payable ($50,000),
short-term notes payable ($30,000), current portion of long-term debt ($20,000), and accrued
expenses ($15,000). Total current liabilities = $50,000 + $30,000 + $20,000 + $15,000 =
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$115,000. Long-term debt ($100,000) and non-current deferred tax liability ($25,000) are
classified as non-current liabilities.
---
**Question 3**
Which of the following items would be reported as a component of other comprehensive income
(OCI) rather than net income?
A) Gain on sale of equipment
B) Unrealized gain on available-for-sale debt securities
C) Revenue from sales of goods
D) Interest income from investments
**Correct Answer: B**
**Rationale:** Other comprehensive income includes certain gains and losses that are excluded
from net income under US GAAP. Unrealized gains and losses on available-for-sale debt
securities are reported in OCI until realized. Gain on sale of equipment (A) is reported in net
income as part of continuing operations. Revenue from sales (C) and interest income (D) are
both reported in net income.
---
**Question 4**
A company reported net income of $500,000 for the year. Additional information:
- Depreciation expense: $80,000
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- Increase in accounts receivable: $25,000
- Decrease in inventory: $15,000
- Increase in accounts payable: $20,000
- Gain on sale of equipment: $10,000
Using the indirect method, what is the net cash provided by operating activities?
A) $500,000
B) $540,000
C) $580,000
D) $620,000
**Correct Answer: C**
**Rationale:** Under the indirect method, net cash from operating activities starts with net
income and adjusts for non-cash items and changes in working capital accounts:
Net income: $500,000
+ Depreciation (non-cash): $80,000
- Increase in A/R: ($25,000)
+ Decrease in inventory: $15,000
+ Increase in A/P: $20,000
- Gain on sale of equipment: ($10,000)
Net cash from operating activities = $500,000 + $80,000 - $25,000 + $15,000 + $20,000 -
$10,000 = $580,000.
---
