CMA® Exam Prep 2026 Updated Practice Questions,
Comprehensive Certified Management Accountant Review,
Detailed Explanations, Verified Answers & Complete
Success Study Workbook
PART 1: FINANCIAL PLANNING, PERFORMANCE, AND ANALYTICS
Topic Weights (Part 1):
Topic Weight
A. External Financial Reporting Decisions 15%
B. Planning, Budgeting, and Forecasting 20%
C. Performance Management 20%
D. Cost Management 15%
E. Internal Controls 15%
F. Technology and Analytics 15%
TOPIC A: EXTERNAL FINANCIAL REPORTING DECISIONS (15%) —
Questions 1–15
Question 1
Under ASC 606, an entity recognizes revenue from a contract with a customer
when:
,A. The contract is signed by both parties
B. The customer pays for the goods or services
C. The entity satisfies a performance obligation by transferring a promised good or
service to the customer
D. The goods are shipped from the entity's warehouse
Correct Answer: C
Rationale: Under ASC 606 (Revenue from Contracts with Customers), revenue is
recognized when the entity satisfies a performance obligation by transferring a
promised good or service to a customer. The transfer occurs when the customer
obtains control of the asset. Contract signing (A) does not trigger revenue
recognition. Payment (B) is not the recognition trigger — revenue may be
recognized before or after payment. Shipping (D) may be an indicator but is not the
sole criterion; control must transfer to the customer.
Question 2
A company sells a product with a standard 1-year warranty. The warranty provides
assurance that the product functions as intended. Under U.S. GAAP, how should
the company account for the warranty?
A. Recognize revenue for the full selling price and accrue an estimated warranty
liability
B. Defer a portion of the revenue as a separate performance obligation
C. Recognize revenue only after the warranty period expires
D. Recognize warranty expense only when warranty claims are actually made
Correct Answer: A
Rationale: Assurance-type warranties (providing assurance that the product
functions as intended) are not separate performance obligations under ASC 606.
The full selling price is recognized as revenue when the performance obligation is
satisfied, and an estimated warranty liability is accrued based on historical
experience. Option B describes service-type warranties (which are separate
performance obligations). Option C delays revenue recognition inappropriately.
Option D violates the matching principle — warranty expense should be estimated
and accrued when the related revenue is recognized.
,Question 3
Under U.S. GAAP, which of the following is NOT a required financial statement?
A. Balance Sheet
B. Statement of Cash Flows
C. Statement of Changes in Retained Earnings
D. Statement of Comprehensive Income
Correct Answer: C
Rationale: Under U.S. GAAP, the required financial statements are: Balance
Sheet, Income Statement, Statement of Cash Flows, and Statement of
Comprehensive Income (which may be presented as a separate statement or
combined with the Income Statement). A Statement of Changes in Retained
Earnings is not required; changes in equity may be presented in the Statement of
Changes in Equity or in the notes.
Question 4
A company uses the FIFO inventory method. During a period of rising prices,
which of the following is TRUE?
A. Cost of goods sold is higher than under LIFO
B. Ending inventory is lower than under LIFO
C. Gross profit is higher than under LIFO
D. Net income is lower than under LIFO
Correct Answer: C
Rationale: During rising prices, FIFO assigns the oldest (lowest) costs to cost of
goods sold, resulting in lower COGS, higher gross profit, and higher net income
compared to LIFO. Ending inventory is valued at newer (higher) costs, so ending
inventory is higher under FIFO, not lower (B). COGS is lower under FIFO, not
higher (A). Net income is higher, not lower (D).
Question 5
A company has the following information for the year:
, • Net income: $100,000
• Depreciation expense: $15,000
• Gain on sale of equipment: $5,000
• Increase in accounts receivable: $8,000
• Decrease in accounts payable: $3,000
Using the indirect method, what is the net cash provided by operating activities?
A. $99,000
B. $109,000
C. $89,000
D. $115,000
Correct Answer: A
Rationale: Under the indirect method:
Net income: $100,000
• Depreciation: +$15,000
• Gain on sale: -$5,000
• Increase in AR: -$8,000
• Decrease in AP: -$3,000
**Net cash provided by operating activities = $99,000**
Question 6
Under the lower of cost or market (LCM) rule, what is the "ceiling" for market
value?
A. Replacement cost
B. Net realizable value (NRV)
C. NRV minus normal profit margin
D. Historical cost
Correct Answer: B
Rationale: Under LCM, market value is defined as replacement cost, subject to a
ceiling of net realizable value (NRV = selling price minus estimated costs of
Comprehensive Certified Management Accountant Review,
Detailed Explanations, Verified Answers & Complete
Success Study Workbook
PART 1: FINANCIAL PLANNING, PERFORMANCE, AND ANALYTICS
Topic Weights (Part 1):
Topic Weight
A. External Financial Reporting Decisions 15%
B. Planning, Budgeting, and Forecasting 20%
C. Performance Management 20%
D. Cost Management 15%
E. Internal Controls 15%
F. Technology and Analytics 15%
TOPIC A: EXTERNAL FINANCIAL REPORTING DECISIONS (15%) —
Questions 1–15
Question 1
Under ASC 606, an entity recognizes revenue from a contract with a customer
when:
,A. The contract is signed by both parties
B. The customer pays for the goods or services
C. The entity satisfies a performance obligation by transferring a promised good or
service to the customer
D. The goods are shipped from the entity's warehouse
Correct Answer: C
Rationale: Under ASC 606 (Revenue from Contracts with Customers), revenue is
recognized when the entity satisfies a performance obligation by transferring a
promised good or service to a customer. The transfer occurs when the customer
obtains control of the asset. Contract signing (A) does not trigger revenue
recognition. Payment (B) is not the recognition trigger — revenue may be
recognized before or after payment. Shipping (D) may be an indicator but is not the
sole criterion; control must transfer to the customer.
Question 2
A company sells a product with a standard 1-year warranty. The warranty provides
assurance that the product functions as intended. Under U.S. GAAP, how should
the company account for the warranty?
A. Recognize revenue for the full selling price and accrue an estimated warranty
liability
B. Defer a portion of the revenue as a separate performance obligation
C. Recognize revenue only after the warranty period expires
D. Recognize warranty expense only when warranty claims are actually made
Correct Answer: A
Rationale: Assurance-type warranties (providing assurance that the product
functions as intended) are not separate performance obligations under ASC 606.
The full selling price is recognized as revenue when the performance obligation is
satisfied, and an estimated warranty liability is accrued based on historical
experience. Option B describes service-type warranties (which are separate
performance obligations). Option C delays revenue recognition inappropriately.
Option D violates the matching principle — warranty expense should be estimated
and accrued when the related revenue is recognized.
,Question 3
Under U.S. GAAP, which of the following is NOT a required financial statement?
A. Balance Sheet
B. Statement of Cash Flows
C. Statement of Changes in Retained Earnings
D. Statement of Comprehensive Income
Correct Answer: C
Rationale: Under U.S. GAAP, the required financial statements are: Balance
Sheet, Income Statement, Statement of Cash Flows, and Statement of
Comprehensive Income (which may be presented as a separate statement or
combined with the Income Statement). A Statement of Changes in Retained
Earnings is not required; changes in equity may be presented in the Statement of
Changes in Equity or in the notes.
Question 4
A company uses the FIFO inventory method. During a period of rising prices,
which of the following is TRUE?
A. Cost of goods sold is higher than under LIFO
B. Ending inventory is lower than under LIFO
C. Gross profit is higher than under LIFO
D. Net income is lower than under LIFO
Correct Answer: C
Rationale: During rising prices, FIFO assigns the oldest (lowest) costs to cost of
goods sold, resulting in lower COGS, higher gross profit, and higher net income
compared to LIFO. Ending inventory is valued at newer (higher) costs, so ending
inventory is higher under FIFO, not lower (B). COGS is lower under FIFO, not
higher (A). Net income is higher, not lower (D).
Question 5
A company has the following information for the year:
, • Net income: $100,000
• Depreciation expense: $15,000
• Gain on sale of equipment: $5,000
• Increase in accounts receivable: $8,000
• Decrease in accounts payable: $3,000
Using the indirect method, what is the net cash provided by operating activities?
A. $99,000
B. $109,000
C. $89,000
D. $115,000
Correct Answer: A
Rationale: Under the indirect method:
Net income: $100,000
• Depreciation: +$15,000
• Gain on sale: -$5,000
• Increase in AR: -$8,000
• Decrease in AP: -$3,000
**Net cash provided by operating activities = $99,000**
Question 6
Under the lower of cost or market (LCM) rule, what is the "ceiling" for market
value?
A. Replacement cost
B. Net realizable value (NRV)
C. NRV minus normal profit margin
D. Historical cost
Correct Answer: B
Rationale: Under LCM, market value is defined as replacement cost, subject to a
ceiling of net realizable value (NRV = selling price minus estimated costs of
