CMA Exam 2026 Latest Comprehensive
Study Guide with Practice Questions
PART 1: FINANCIAL PLANNING, PERFORMANCE, AND ANALYTICS
(Questions 1–50)
Section A: External Financial Reporting Decisions (15%)
Question 1
Under U.S. GAAP, which of the following is a criterion for revenue recognition
under ASC 606?
A) The seller has transferred control of the goods or services to the customer
B) The seller has transferred legal title to the customer
C) The customer has made payment
D) The seller has shipped the goods
Correct Answer: A
Rationale: Under ASC 606, revenue is recognized when control of the goods or
services has been transferred to the customer. Control is the ability to direct the
use of and obtain substantially all the remaining benefits from the asset. Legal title
(B), payment (C), or shipping (D) may be indicators but are not the sole criteria.
ASC 606 establishes a five-step model where the final step is recognizing revenue
when (or as) the performance obligation is satisfied—which occurs when control
transfers.
Question 2
Under the lower of cost or market (LCM) rule, what is the "market" value for
inventory valuation?
A) Replacement cost
B) Net realizable value
,C) Net realizable value less a normal profit margin
D) The middle value of replacement cost, net realizable value, and net realizable
value less a normal profit margin
Correct Answer: D
Rationale: Under U.S. GAAP, "market" for LCM purposes is the middle value of
replacement cost, net realizable value (NRV), and NRV less a normal profit
margin. Replacement cost serves as the ceiling and floor limits: market cannot
exceed NRV (ceiling) and cannot be less than NRV minus a normal profit margin
(floor). This prevents overstatement or understatement of inventory value.
Question 3
Which of the following best describes the difference between U.S. GAAP and
IFRS regarding inventory costing?
A) LIFO is permitted under U.S. GAAP but prohibited under IFRS
B) FIFO is permitted under U.S. GAAP but prohibited under IFRS
C) Weighted average is permitted under IFRS but prohibited under U.S. GAAP
D) Both standards require the same inventory costing methods
Correct Answer: A
Rationale: LIFO (Last-In, First-Out) is permitted under U.S. GAAP but is
prohibited under IFRS. Both standards permit FIFO and weighted average
costing methods. This is one of the most significant differences between the two
frameworks, as LIFO can result in lower taxable income during periods of rising
prices due to higher cost of goods sold.
Question 4
How are operating leases treated under ASC 842 from the lessee's perspective?
A) Operating leases are off-balance-sheet with only lease expense recognized
B) Operating leases require recognition of a right-of-use asset and a lease liability
C) Operating leases are capitalized with interest expense recognized
D) Operating leases are not recognized at all
Correct Answer: B
,Rationale: Under ASC 842, lessees must recognize a right-of-use asset and a
lease liability for all leases (both operating and finance leases), with limited
exceptions for short-term leases. This represents a significant change from
previous standards where operating leases were off-balance-sheet. Finance leases
(C) also recognize an asset and liability but with different expense recognition
(interest + amortization vs. straight-line for operating leases).
Question 5
When preparing a statement of cash flows under U.S. GAAP using the indirect
method, which of the following would be added back to net income?
A) Gain on sale of equipment
B) Increase in accounts receivable
C) Depreciation expense
D) Decrease in accounts payable
Correct Answer: C
Rationale: Depreciation expense is a non-cash charge that reduces net income but
does not affect cash. Under the indirect method, it is added back to net income in
the operating activities section. Gains on sale of equipment (A) are subtracted (not
added) because the gain is included in net income but the full cash proceeds are
reported in investing activities. Increases in accounts receivable (B) and decreases
in accounts payable (D) are subtracted because they represent uses of cash.
Question 6
What is the correct accounting treatment for a change in accounting principle?
A) Prospective application only
B) Retrospective application with adjustment to beginning retained earnings
C) Cumulative effect adjustment to current period income
D) No adjustment is required
Correct Answer: B
Rationale: A change in accounting principle generally requires retrospective
application with the cumulative effect of the change adjusted to beginning
, retained earnings of the earliest period presented. Changes in accounting
estimates (A) are applied prospectively. The cumulative effect is not reported in
current period income (C).
Question 7
Under U.S. GAAP, goodwill is tested for impairment:
A) Annually, regardless of whether there are indicators of impairment
B) Only when there are indicators of impairment
C) Only at the acquisition date
D) Only when the company elects to do so
Correct Answer: A
Rationale: Under U.S. GAAP (ASC 350), goodwill must be tested for
impairment at least annually, regardless of whether there are indicators of
impairment. Additional testing is required whenever specific indicators suggest the
goodwill may be impaired. This is consistent with IFRS (IAS 36), which also
requires at least annual impairment testing.
Question 8
Which of the following is classified as a component of other comprehensive
income (OCI)?
A) Gain on sale of investments
B) Unrealized gain on available-for-sale debt securities
C) Revenue from services
D) Interest income
Correct Answer: B
Rationale: Unrealized gains and losses on available-for-sale debt securities are
reported in other comprehensive income (OCI). Gains on sale of investments (A)
are realized and reported in net income. Revenue from services (C) and interest
income (D) are also reported in net income. OCI includes items that bypass the
income statement but affect comprehensive income.
Study Guide with Practice Questions
PART 1: FINANCIAL PLANNING, PERFORMANCE, AND ANALYTICS
(Questions 1–50)
Section A: External Financial Reporting Decisions (15%)
Question 1
Under U.S. GAAP, which of the following is a criterion for revenue recognition
under ASC 606?
A) The seller has transferred control of the goods or services to the customer
B) The seller has transferred legal title to the customer
C) The customer has made payment
D) The seller has shipped the goods
Correct Answer: A
Rationale: Under ASC 606, revenue is recognized when control of the goods or
services has been transferred to the customer. Control is the ability to direct the
use of and obtain substantially all the remaining benefits from the asset. Legal title
(B), payment (C), or shipping (D) may be indicators but are not the sole criteria.
ASC 606 establishes a five-step model where the final step is recognizing revenue
when (or as) the performance obligation is satisfied—which occurs when control
transfers.
Question 2
Under the lower of cost or market (LCM) rule, what is the "market" value for
inventory valuation?
A) Replacement cost
B) Net realizable value
,C) Net realizable value less a normal profit margin
D) The middle value of replacement cost, net realizable value, and net realizable
value less a normal profit margin
Correct Answer: D
Rationale: Under U.S. GAAP, "market" for LCM purposes is the middle value of
replacement cost, net realizable value (NRV), and NRV less a normal profit
margin. Replacement cost serves as the ceiling and floor limits: market cannot
exceed NRV (ceiling) and cannot be less than NRV minus a normal profit margin
(floor). This prevents overstatement or understatement of inventory value.
Question 3
Which of the following best describes the difference between U.S. GAAP and
IFRS regarding inventory costing?
A) LIFO is permitted under U.S. GAAP but prohibited under IFRS
B) FIFO is permitted under U.S. GAAP but prohibited under IFRS
C) Weighted average is permitted under IFRS but prohibited under U.S. GAAP
D) Both standards require the same inventory costing methods
Correct Answer: A
Rationale: LIFO (Last-In, First-Out) is permitted under U.S. GAAP but is
prohibited under IFRS. Both standards permit FIFO and weighted average
costing methods. This is one of the most significant differences between the two
frameworks, as LIFO can result in lower taxable income during periods of rising
prices due to higher cost of goods sold.
Question 4
How are operating leases treated under ASC 842 from the lessee's perspective?
A) Operating leases are off-balance-sheet with only lease expense recognized
B) Operating leases require recognition of a right-of-use asset and a lease liability
C) Operating leases are capitalized with interest expense recognized
D) Operating leases are not recognized at all
Correct Answer: B
,Rationale: Under ASC 842, lessees must recognize a right-of-use asset and a
lease liability for all leases (both operating and finance leases), with limited
exceptions for short-term leases. This represents a significant change from
previous standards where operating leases were off-balance-sheet. Finance leases
(C) also recognize an asset and liability but with different expense recognition
(interest + amortization vs. straight-line for operating leases).
Question 5
When preparing a statement of cash flows under U.S. GAAP using the indirect
method, which of the following would be added back to net income?
A) Gain on sale of equipment
B) Increase in accounts receivable
C) Depreciation expense
D) Decrease in accounts payable
Correct Answer: C
Rationale: Depreciation expense is a non-cash charge that reduces net income but
does not affect cash. Under the indirect method, it is added back to net income in
the operating activities section. Gains on sale of equipment (A) are subtracted (not
added) because the gain is included in net income but the full cash proceeds are
reported in investing activities. Increases in accounts receivable (B) and decreases
in accounts payable (D) are subtracted because they represent uses of cash.
Question 6
What is the correct accounting treatment for a change in accounting principle?
A) Prospective application only
B) Retrospective application with adjustment to beginning retained earnings
C) Cumulative effect adjustment to current period income
D) No adjustment is required
Correct Answer: B
Rationale: A change in accounting principle generally requires retrospective
application with the cumulative effect of the change adjusted to beginning
, retained earnings of the earliest period presented. Changes in accounting
estimates (A) are applied prospectively. The cumulative effect is not reported in
current period income (C).
Question 7
Under U.S. GAAP, goodwill is tested for impairment:
A) Annually, regardless of whether there are indicators of impairment
B) Only when there are indicators of impairment
C) Only at the acquisition date
D) Only when the company elects to do so
Correct Answer: A
Rationale: Under U.S. GAAP (ASC 350), goodwill must be tested for
impairment at least annually, regardless of whether there are indicators of
impairment. Additional testing is required whenever specific indicators suggest the
goodwill may be impaired. This is consistent with IFRS (IAS 36), which also
requires at least annual impairment testing.
Question 8
Which of the following is classified as a component of other comprehensive
income (OCI)?
A) Gain on sale of investments
B) Unrealized gain on available-for-sale debt securities
C) Revenue from services
D) Interest income
Correct Answer: B
Rationale: Unrealized gains and losses on available-for-sale debt securities are
reported in other comprehensive income (OCI). Gains on sale of investments (A)
are realized and reported in net income. Revenue from services (C) and interest
income (D) are also reported in net income. OCI includes items that bypass the
income statement but affect comprehensive income.
