Free IMA CMA Part 1 (Financial Planning, Performance, and Analytics) External Financial Reporting Decisions Practice Questions

External Financial Reporting Decisions on CMA Part 1 covers financial statement preparation under US GAAP and IFRS (balance sheet, income statement, statement of changes in equity, cash flow statement), revenue recognition under ASC 606, inventory valuation (FIFO, LIFO, weighted-average), long-term assets and impairment, and intangibles. The IMA Content Specification Outline allocates 15% of Part 1 to this section.

67 Questions
24 Easy
28 Medium
15 Hard
2026 Syllabus

Sample Questions

Question 1 Easy
Under ASC 606, an entity recognizes revenue from a contract with a customer when:
Solution
B is correct. ASC 606 (Step 5 of the five-step model) requires revenue to be recognized when (or as) the entity satisfies a performance obligation by transferring control of a promised good or service to the customer. Control transfer, not cash collection or billing, is the recognition trigger.
Question 2 Medium
Under U.S. GAAP, which of the following expenditures should be capitalized as an intangible asset rather than expensed as incurred?
Solution
D is correct. Under ASC 350 and ASC 730, internal research and development costs are generally expensed as incurred because the future economic benefits are too uncertain at that stage. However, legal fees incurred to register a patent (or to successfully defend it) represent costs to acquire and protect a specific legal right and are capitalized as part of the intangible asset's cost. These fees create a separately identifiable, controllable asset with a measurable cost.
Question 3 Hard
A company reports the following for the year: beginning inventory $50,000; purchases $200,000; ending inventory at cost $40,000 with a net realizable value of $35,000; sales $300,000; operating expenses $40,000; and an effective tax rate of 25%. Assuming the inventory write-down is recognized through cost of goods sold, what is net income?
Solution
A is correct. Cost of goods sold before write-down equals 50,000+200,000−40,000=210,00050{,}000 + 200{,}000 - 40{,}000 = 210{,}000. The inventory write-down of 40,000−35,000=5,00040{,}000 - 35{,}000 = 5{,}000 is added to COGS, giving adjusted COGS of 215,000215{,}000. Gross profit equals 300,000−215,000=85,000300{,}000 - 215{,}000 = 85{,}000. Operating income equals 85,000−40,000=45,00085{,}000 - 40{,}000 = 45{,}000. Net income equals 45,000×(1−0.25)=33,75045{,}000 \times (1 - 0.25) = 33{,}750.
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