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Certified Management Accountant (CMA)
Examination: Comprehensive Advanced-Level
Multiple-Choice Question Bank – 150 Questions
Covering Financial Planning, Performance,
Analytics, Strategic Financial Management,
Corporate Finance, Decision Analysis, Risk
Management, Capital Investment Decisions,
and Professional Ethics a well detailed one
written and graded A+
upgraded
Part 1: Financial Planning, Performance, and Analytics – Questions 1–75
Section A: External Financial Reporting Decisions (Questions 1–12)
1. Under U.S. GAAP, which of the following is the correct treatment for a change in accounting
estimate?
A) Retrospective application to all prior periods presented
B) Prospective application with disclosure of the effect on current and future periods
C) Cumulative catch-up adjustment to retained earnings
D) Restatement of prior period financial statements
- detailed answer 100 % correct :-B
, 2
Rationale: A change in accounting estimate is applied prospectively; it is not applied
retrospectively. The effect of the change should be accounted for in the period of change and
future periods if affected. The cumulative effect is not adjusted to retained earnings, nor are
prior periods restated.
2. Which of the following is NOT a criterion for revenue recognition under the ASC 606 five-
step model?
A) Identification of the contract with the customer
B) Identification of the performance obligations in the contract
C) Determination of the transaction price
D) Recognition of revenue when the contract is signed
- detailed answer 100 % correct :-D
Rationale: Under ASC 606, the five steps are: (1) identify the contract, (2) identify performance
obligations, (3) determine transaction price, (4) allocate transaction price to performance
obligations, and (5) recognize revenue when (or as) performance obligations are satisfied.
Recognition occurs when control transfers, not merely when the contract is signed.
3. A company has a defined benefit pension plan. Under U.S. GAAP, the actuarial gains and
losses that exceed the corridor amount are amortized over which period?
A) The expected remaining service life of active employees
B) The average remaining service life of active employees
C) The remaining life expectancy of retirees
D) Immediately through other comprehensive income
- detailed answer 100 % correct :-B
Rationale: Actuarial gains and losses exceeding the corridor (10% of the greater of PBO or plan
assets) are amortized over the average remaining service life of active employees. If
substantially all plan participants are inactive, the remaining life expectancy of retirees is used.
4. Which of the following best describes the difference between comprehensive income and
net income?
, 3
A) Comprehensive income includes only operating activities
B) Comprehensive income includes all changes in equity except owner transactions
C) Comprehensive income excludes unrealized gains and losses
D) Comprehensive income is reported only in the statement of cash flows
- detailed answer 100 % correct :-B
Rationale: Comprehensive income includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners. It includes net income plus
other comprehensive income items such as unrealized gains/losses on available-for-sale
securities, foreign currency translation adjustments, and pension adjustments.
5. Under the current expected credit loss (CECL) model, an entity recognizes an allowance for
credit losses based on:
A) Historical loss rates only
B) The contractual term of the financial asset
C) Expected credit losses over the contractual life of the asset
D) Incurred losses only
- detailed answer 100 % correct :-C
Rationale: The CECL model requires entities to recognize expected credit losses over the
contractual life of financial assets. It is forward-looking and considers historical experience,
current conditions, and reasonable and supportable forecasts, unlike the previous incurred loss
model.
6. A lessor classifies a lease as a sales-type lease. Under U.S. GAAP, at the commencement
date, the lessor recognizes:
A) Only lease income over the lease term
B) Sales revenue equal to the fair value of the underlying asset
C) A lease receivable and deferred profit
D) Sales revenue equal to the present value of lease payments and cost of goods sold
- detailed answer 100 % correct :-D
Rationale: In a sales-type lease, the lessor recognizes sales revenue equal to the present value
of the lease payments (or fair value if lower) and cost of goods sold equal to the carrying
amount of the underlying asset, recognizing profit at lease commencement.
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7. Which of the following would be classified as a financing activity on the statement of cash
flows?
A) Purchase of inventory
B) Payment of dividends
C) Sale of equipment
D) Collection of accounts receivable
- detailed answer 100 % correct :-B
Rationale: Dividend payments are classified as financing activities under U.S. GAAP. Inventory
purchases and accounts receivable collections are operating activities; sale of equipment is an
investing activity.
8. The indirect method of preparing the operating section of the statement of cash flows
begins with:
A) Cash collected from customers
B) Cash paid to suppliers
C) Net income
D) Revenue
- detailed answer 100 % correct :-C
Rationale: The indirect method starts with net income and adjusts for non-cash items
(depreciation, amortization), changes in working capital accounts, gains/losses on disposals, and
other items to arrive at net cash provided by operating activities.
9. Under U.S. GAAP, which of the following is a subsequent event that requires adjustment to
the financial statements?
A) Issuance of common stock after year-end
B) Loss of an important customer after year-end
C) Settlement of a lawsuit after year-end that confirms a liability existed at year-end
D) A major fire after year-end
- detailed answer 100 % correct :-C
Certified Management Accountant (CMA)
Examination: Comprehensive Advanced-Level
Multiple-Choice Question Bank – 150 Questions
Covering Financial Planning, Performance,
Analytics, Strategic Financial Management,
Corporate Finance, Decision Analysis, Risk
Management, Capital Investment Decisions,
and Professional Ethics a well detailed one
written and graded A+
upgraded
Part 1: Financial Planning, Performance, and Analytics – Questions 1–75
Section A: External Financial Reporting Decisions (Questions 1–12)
1. Under U.S. GAAP, which of the following is the correct treatment for a change in accounting
estimate?
A) Retrospective application to all prior periods presented
B) Prospective application with disclosure of the effect on current and future periods
C) Cumulative catch-up adjustment to retained earnings
D) Restatement of prior period financial statements
- detailed answer 100 % correct :-B
, 2
Rationale: A change in accounting estimate is applied prospectively; it is not applied
retrospectively. The effect of the change should be accounted for in the period of change and
future periods if affected. The cumulative effect is not adjusted to retained earnings, nor are
prior periods restated.
2. Which of the following is NOT a criterion for revenue recognition under the ASC 606 five-
step model?
A) Identification of the contract with the customer
B) Identification of the performance obligations in the contract
C) Determination of the transaction price
D) Recognition of revenue when the contract is signed
- detailed answer 100 % correct :-D
Rationale: Under ASC 606, the five steps are: (1) identify the contract, (2) identify performance
obligations, (3) determine transaction price, (4) allocate transaction price to performance
obligations, and (5) recognize revenue when (or as) performance obligations are satisfied.
Recognition occurs when control transfers, not merely when the contract is signed.
3. A company has a defined benefit pension plan. Under U.S. GAAP, the actuarial gains and
losses that exceed the corridor amount are amortized over which period?
A) The expected remaining service life of active employees
B) The average remaining service life of active employees
C) The remaining life expectancy of retirees
D) Immediately through other comprehensive income
- detailed answer 100 % correct :-B
Rationale: Actuarial gains and losses exceeding the corridor (10% of the greater of PBO or plan
assets) are amortized over the average remaining service life of active employees. If
substantially all plan participants are inactive, the remaining life expectancy of retirees is used.
4. Which of the following best describes the difference between comprehensive income and
net income?
, 3
A) Comprehensive income includes only operating activities
B) Comprehensive income includes all changes in equity except owner transactions
C) Comprehensive income excludes unrealized gains and losses
D) Comprehensive income is reported only in the statement of cash flows
- detailed answer 100 % correct :-B
Rationale: Comprehensive income includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners. It includes net income plus
other comprehensive income items such as unrealized gains/losses on available-for-sale
securities, foreign currency translation adjustments, and pension adjustments.
5. Under the current expected credit loss (CECL) model, an entity recognizes an allowance for
credit losses based on:
A) Historical loss rates only
B) The contractual term of the financial asset
C) Expected credit losses over the contractual life of the asset
D) Incurred losses only
- detailed answer 100 % correct :-C
Rationale: The CECL model requires entities to recognize expected credit losses over the
contractual life of financial assets. It is forward-looking and considers historical experience,
current conditions, and reasonable and supportable forecasts, unlike the previous incurred loss
model.
6. A lessor classifies a lease as a sales-type lease. Under U.S. GAAP, at the commencement
date, the lessor recognizes:
A) Only lease income over the lease term
B) Sales revenue equal to the fair value of the underlying asset
C) A lease receivable and deferred profit
D) Sales revenue equal to the present value of lease payments and cost of goods sold
- detailed answer 100 % correct :-D
Rationale: In a sales-type lease, the lessor recognizes sales revenue equal to the present value
of the lease payments (or fair value if lower) and cost of goods sold equal to the carrying
amount of the underlying asset, recognizing profit at lease commencement.
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7. Which of the following would be classified as a financing activity on the statement of cash
flows?
A) Purchase of inventory
B) Payment of dividends
C) Sale of equipment
D) Collection of accounts receivable
- detailed answer 100 % correct :-B
Rationale: Dividend payments are classified as financing activities under U.S. GAAP. Inventory
purchases and accounts receivable collections are operating activities; sale of equipment is an
investing activity.
8. The indirect method of preparing the operating section of the statement of cash flows
begins with:
A) Cash collected from customers
B) Cash paid to suppliers
C) Net income
D) Revenue
- detailed answer 100 % correct :-C
Rationale: The indirect method starts with net income and adjusts for non-cash items
(depreciation, amortization), changes in working capital accounts, gains/losses on disposals, and
other items to arrive at net cash provided by operating activities.
9. Under U.S. GAAP, which of the following is a subsequent event that requires adjustment to
the financial statements?
A) Issuance of common stock after year-end
B) Loss of an important customer after year-end
C) Settlement of a lawsuit after year-end that confirms a liability existed at year-end
D) A major fire after year-end
- detailed answer 100 % correct :-C
