CMA Sample Exam

1. According to the FASB and IASB conceptual frameworks, the objective of general purpose financial reporting is to

2. On January 2, Year 1, Union Co. purchased a machine for $264,000 and depreciated it by the straight-line method using an estimated useful life of eight years with no salvage value. On January 2, Year 4, Union determined that the machine had a useful life of six years from the date of acquisition and will have a salvage value of $24,000. An accounting change was made in Year 4 to reflect the additional data. The accumulated depreciation for this machine should have a balance at December 31, Year 4, of:

3. A transaction that is unusual in nature or infrequent in occurrence should be reported as a(an):

4. Which of the following is most likely to be the cause of overapplied overhead?

5. Bethany Company has just completed the first month of producing a new product but has not yet shipped any of this product. The product incurred variable manufacturing costs of $5,000,000, fixed manufacturing costs of $2,000,000, variable marketing costs of $1,000,000, and fixe marketing costs of $3,000,000. If Bethany uses the variable cost method to value inventory, the inventory value of the new product would be:

6. Parker Company pays each member of its sales staff a salary as well as a commission on each unit sold. For the coming year, Parker plans to increase all salaries by 5% and to keep unchanged the commission paid on each unit sold. Because of increased demand, Parker expects the volume of sales to increase by 10%. How will the total cost of sales salaries and commissions change for the coming year.

7. Standard costs may be used in the product cost accounts during the year. However, for financial accounting and income tax reporting, costs must be adjusted to reflect ____ cost.

8. Which of the following is not a typical characteristic of just-in-time (JIT) production environment.

9. A routine part of an organization’s disaster recovery plan should require the ongoing preparation of which the following:

10. Internal accounting controls are concerned primarily with:

11. Which one of the following types of audits would be most likely to focus on objectives related to the economic and efficient use of resources?

12. A corporation has $750,000 in short-term debt outstanding and December 31, 20X1. On January 5, 20X2, the corporation issued stock to liquidate the short-term debt, the proceeds of which totaled $600,000. Since the corporation intended to refinance the short-term obligation, what amount of short-term obligation can be excluded from short-term liabilities the corporation issued its December 31, 20X1 financial statements on January 31, 20X2.

13. Foster Co adjusted its allowance for uncollectible accounts at year-end. The general ledger balances for the accounts receivable and the related allowance account $1,000,000 and $40,000 respectively. Foster uses the percentage-of-receivables method to estimate its allowance for uncollectible accounts. Accounts receivable were estimated to be 5% uncollectible. What amount should Foster record as an adjustment to its allowance for uncollectible accounts at year end?

14. Operating managers at the middle and lower levels are most likely to buy in and support budgets prepared in a manner that is

15. Which one of the following items is the last schedule to be prepared in the normal budget preparation process

16. Investors are willing to accept a lower return from a risk-free investment such as U.S government bond than they would accept from a more risky investment such as shares of public corporation. What is the difference between the investors’ required return and risk-free return?

17. Cyber Company’s current ratio is 3 to 1 and current liabilities total $62,000. What is Cyber’s net working capital?

18. Which of the following is not correct when a company is planning to issue additional shares of common stock.

19. Kalamazoo, Inc., has issued 25,000 shares of its authorized 50,000 shares of common stock. There are 5,000 shares of common stock that have been repurchased and are classified as treasury stock. Kalamazoo has 10,000 shares of preferred stock. If a $0.60 per share dividend has been authorized on its common stock, what will be the total common stock dividend payment?

20. Which of the following is a derivative financial instrument?

21. Jackson Distributors sells to retail stores on credit terms of 2/10, net 30. Daily sales average 150 units at a price $300 each. Assuming that all sales are on credit and 60% of customers take the discount and pay on Day 10 while the rest of the customers pay on Day 30, the amount of Jackson’s accounts receivable is:

22. The working capital financing policy that subjects the firm to the greatest risk of being unable to meet the firm’s maturing obligations is the policy that finances:

23. The firm’s marginal cost of capital:

24. Which of the following information is not contained in a corporate bond indenture

25. Lang National Bank offered a one-year loan to a commercial customer. The instrument is a discounted note with a nominal rate of 12%. What is the effective interest rate to the borrower?

26. International trade may be facilitated by the use of letters of credit. Under this arrangement, banks honor drafts dawn on the:

27. Wilton Corporation has 5,000 shares of 6% cumulative, $100 par value, preferred stock outstanding and 175,000 shares of common stock outstanding. No dividends have been paid by the company since May 31, 20X1. For the year ended May 31, 20X3, Wilton had net income of $1,450,000 and wishes to pay common shareholders a dividend equivalent of 25% of net income. The total amount of dividends to be paid by Wilton Corporation at May 31, 20X3, is :

28. Gates, Inc., has been offered as one year-loan by its commercial bank. The instrument is discounted note with a stated interest rate of 9%. If Gates needs $300,000 for use in the business, what should the face value of the note be?

29. Letters of credit are often used to facilitate international trade. The basic purpose of the letter of credit is to reduce risk to the:

30. Using the Capital Assets Pricing Model (CAPM), the required rate of return for a firm with a beta of 1.25 when the market return is 14% and the risk-free rate is 6% is: