GBA 3 Exam |100 Questions| With Correct Solutions!! 2026/2027 -- 2026/2027 | Page 1 | Passing Score: 75%
GBA CERTIFICATION
GBA 3 Exam |100 Questions| With Correct
Solutions!!
2026/2027
GBA 3 -- Official Exam 2026/2027
100 75% CERTIFIED
QUESTIONS PASSING SCORE RECERTIFICATION
TABLE OF CONTENTS
Section 1 Financial Accounting & Reporting Q1-Q20
Section 2 Managerial Accounting & Cost Analysis Q21-Q40
Section 3 Business Law & Ethics Q41-Q60
Section 4 Economics & Quantitative Analysis Q61-Q80
Section 5 Information Systems & Internal Controls Q81-Q100
Instructions: Select the single best answer for each question. This exam is designed for GBA 3 Exam
preparation. Passing score: 75% (75 questions correct).
GBA 3 Exam |100 Questions| With Correct Solutions!! 2026/2027 -- 2026/2027 | Passing Score: 75% | Page 1 of 52
,SECTION 1 | Financial Accounting & Reporting | Q1-Q20 | GBA 3 Exam |100 Questions| With
Correct Solutions!! 2026/2027 -- 2026/2027
Q1 Question 1 of 100
Q1. A manufacturing company discovers that its ending inventory for the prior year was
overstated by $45,000 due to a counting error. The error was not discovered until the current
year's audit. The financial statements for the prior year have already been issued. Under
GAAP, the company must determine the appropriate correction approach for this material
misstatement.
A. Retain the prior year statements as issued and record a prior period adjustment to the
beginning retained earnings of the current year
B. Restate and reissue the prior year financial statements with corrected figures immediately
C. Record the $45,000 correction as an extraordinary item on the current year income statement
D. Adjust the current year cost of goods sold by $45,000 without any retained earnings
adjustment
Correct Answer: A
Rationale:
An inventory overstatement reduces prior COGS and overstates prior net income, requiring a prior period
adjustment to beginning retained earnings. Restating and reissuing is not required under GAAP for this
type of error; instead, the correction is made to the current period's opening balance. The correction does
not flow through the income statement as an extraordinary item.
Q2 Question 2 of 100
Q2. A software company enters into a contract to deliver a licensed software package along
with one year of technical support. The total contract price is $120,000, and the standalone
selling prices are $95,000 for the license and $35,000 for the support. The company must
allocate revenue to each performance obligation in accordance with ASC 606.
A. Allocate $95,000 to the license and $25,000 to the support based on the license's standalone
price first
B. Allocate $87,692 to the license and $32,308 to the support based on relative standalone
selling prices
C. Allocate $60,000 to each performance obligation based on equal division of the contract price
D. Allocate $120,000 to the license and recognize support revenue as incurred over the year
Correct Answer: B
, Rationale:
Under ASC 606, revenue allocation is based on relative standalone selling prices. The license proportion
is 95,000/130,000 = 73.08%, yielding $87,692, and support is 35,000/130,000 = 26.92%, yielding
$32,308. Equal division ignores standalone pricing, and allocating the full amount to one obligation
violates the five-step model.
Q3 Question 3 of 100
Q3. A retail corporation uses the LIFO inventory method during a period of rising prices. At
year-end, the company experiences a partial liquidation of its LIFO layers when inventory
quantities decline below beginning levels. Management needs to understand the financial
reporting implications of this LIFO liquidation.
A. The LIFO liquidation reduces taxable income because newer higher costs are recognized
immediately
B. The LIFO liquidation has no effect on the income statement because only current-year
purchases affect COGS
C. The LIFO liquidation results in lower cost of goods sold and higher reported income because
older, lower-cost layers are matched against current revenues
D. The LIFO liquidation increases cost of goods sold and decreases reported income under
rising price conditions
Correct Answer: C
Rationale:
A LIFO liquidation occurs when inventory declines, causing older, lower-cost layers to be matched against
current sales, thus reducing COGS and increasing reported income. This creates a LIFO liquidation profit
that is not sustainable. The effect is the opposite of increasing COGS under rising prices.
Q4 Question 4 of 100
Q4. A construction company signs a five-year lease for heavy equipment with annual
payments of $25,000, payable at the beginning of each year. The implicit rate in the lease is
6%, and the fair value of the equipment is approximately $111,650. The company classifies
the lease as a finance lease under ASC 842.
A. The company records the full $125,000 of lease payments as a liability on the
commencement date without discounting
B. The company records rent expense of $25,000 per year and discloses the lease in the
footnotes only
C. The company records a right-of-use asset at fair value of $111,650 but no lease liability on
the balance sheet
D. The company records a right-of-use asset and lease liability at present value, with the liability
reduced by the first payment on the commencement date
GBA 3 Exam |100 Questions| With Correct Solutions!! 2026/2027 -- 2026/2027 | Passing Score: 75% | Page 2 of 52
, Correct Answer: D
Rationale:
Under ASC 842, finance leases require recognition of a right-of-use asset and lease liability at present
value. The first payment reduces the liability immediately since it is made at commencement. Recording
undiscounted payments, treating it as operating rent without recognition, or omitting the liability all violate
the standard.
Q5 Question 5 of 100
Q5. A publicly traded company issues $5,000,000 of 6% bonds at 102 on January 1 when
the market rate is 5.2%. The bonds pay interest semiannually and mature in 10 years. The
CFO needs to determine how the premium affects interest expense over the bond's life.
A. The premium is amortized over the bond's life, reducing interest expense below the cash
interest paid each period
B. The premium is amortized over the bond's life, increasing interest expense above the cash
interest paid each period
C. The premium is recorded as a separate gain in the year of issuance and does not affect
future interest expense
D. The premium remains as a separate liability until maturity and is then written off as an
adjustment to retained earnings
Correct Answer: A
Rationale:
When bonds are issued at a premium, the premium is amortized over the life of the bonds, reducing
interest expense below the cash interest paid. Using the effective interest method, interest expense
equals the carrying amount times the market rate, which is lower than the cash payment. The premium is
not a separate gain and must be amortized.
Q6 Question 6 of 100
Q6. A corporation declares a 15% stock dividend when the market price of its common stock
is $48 per share and the par value is $10. There are 200,000 shares outstanding before the
dividend. The controller must determine the correct accounting for this stock dividend under
GAAP.
A. Debit retained earnings for $300,000 equal to the par value of the additional shares issued
B. Debit retained earnings for $1,440,000 and credit common stock and paid-in capital for the
par value and excess respectively
C. Debit retained earnings for $1,440,000 and credit common stock only at par value with no
additional paid-in capital
D. Record the stock dividend as a memorandum entry only since no cash is distributed to
shareholders
GBA 3 Exam |100 Questions| With Correct Solutions!! 2026/2027 -- 2026/2027 | Passing Score: 75% | Page 3 of 52
GBA CERTIFICATION
GBA 3 Exam |100 Questions| With Correct
Solutions!!
2026/2027
GBA 3 -- Official Exam 2026/2027
100 75% CERTIFIED
QUESTIONS PASSING SCORE RECERTIFICATION
TABLE OF CONTENTS
Section 1 Financial Accounting & Reporting Q1-Q20
Section 2 Managerial Accounting & Cost Analysis Q21-Q40
Section 3 Business Law & Ethics Q41-Q60
Section 4 Economics & Quantitative Analysis Q61-Q80
Section 5 Information Systems & Internal Controls Q81-Q100
Instructions: Select the single best answer for each question. This exam is designed for GBA 3 Exam
preparation. Passing score: 75% (75 questions correct).
GBA 3 Exam |100 Questions| With Correct Solutions!! 2026/2027 -- 2026/2027 | Passing Score: 75% | Page 1 of 52
,SECTION 1 | Financial Accounting & Reporting | Q1-Q20 | GBA 3 Exam |100 Questions| With
Correct Solutions!! 2026/2027 -- 2026/2027
Q1 Question 1 of 100
Q1. A manufacturing company discovers that its ending inventory for the prior year was
overstated by $45,000 due to a counting error. The error was not discovered until the current
year's audit. The financial statements for the prior year have already been issued. Under
GAAP, the company must determine the appropriate correction approach for this material
misstatement.
A. Retain the prior year statements as issued and record a prior period adjustment to the
beginning retained earnings of the current year
B. Restate and reissue the prior year financial statements with corrected figures immediately
C. Record the $45,000 correction as an extraordinary item on the current year income statement
D. Adjust the current year cost of goods sold by $45,000 without any retained earnings
adjustment
Correct Answer: A
Rationale:
An inventory overstatement reduces prior COGS and overstates prior net income, requiring a prior period
adjustment to beginning retained earnings. Restating and reissuing is not required under GAAP for this
type of error; instead, the correction is made to the current period's opening balance. The correction does
not flow through the income statement as an extraordinary item.
Q2 Question 2 of 100
Q2. A software company enters into a contract to deliver a licensed software package along
with one year of technical support. The total contract price is $120,000, and the standalone
selling prices are $95,000 for the license and $35,000 for the support. The company must
allocate revenue to each performance obligation in accordance with ASC 606.
A. Allocate $95,000 to the license and $25,000 to the support based on the license's standalone
price first
B. Allocate $87,692 to the license and $32,308 to the support based on relative standalone
selling prices
C. Allocate $60,000 to each performance obligation based on equal division of the contract price
D. Allocate $120,000 to the license and recognize support revenue as incurred over the year
Correct Answer: B
, Rationale:
Under ASC 606, revenue allocation is based on relative standalone selling prices. The license proportion
is 95,000/130,000 = 73.08%, yielding $87,692, and support is 35,000/130,000 = 26.92%, yielding
$32,308. Equal division ignores standalone pricing, and allocating the full amount to one obligation
violates the five-step model.
Q3 Question 3 of 100
Q3. A retail corporation uses the LIFO inventory method during a period of rising prices. At
year-end, the company experiences a partial liquidation of its LIFO layers when inventory
quantities decline below beginning levels. Management needs to understand the financial
reporting implications of this LIFO liquidation.
A. The LIFO liquidation reduces taxable income because newer higher costs are recognized
immediately
B. The LIFO liquidation has no effect on the income statement because only current-year
purchases affect COGS
C. The LIFO liquidation results in lower cost of goods sold and higher reported income because
older, lower-cost layers are matched against current revenues
D. The LIFO liquidation increases cost of goods sold and decreases reported income under
rising price conditions
Correct Answer: C
Rationale:
A LIFO liquidation occurs when inventory declines, causing older, lower-cost layers to be matched against
current sales, thus reducing COGS and increasing reported income. This creates a LIFO liquidation profit
that is not sustainable. The effect is the opposite of increasing COGS under rising prices.
Q4 Question 4 of 100
Q4. A construction company signs a five-year lease for heavy equipment with annual
payments of $25,000, payable at the beginning of each year. The implicit rate in the lease is
6%, and the fair value of the equipment is approximately $111,650. The company classifies
the lease as a finance lease under ASC 842.
A. The company records the full $125,000 of lease payments as a liability on the
commencement date without discounting
B. The company records rent expense of $25,000 per year and discloses the lease in the
footnotes only
C. The company records a right-of-use asset at fair value of $111,650 but no lease liability on
the balance sheet
D. The company records a right-of-use asset and lease liability at present value, with the liability
reduced by the first payment on the commencement date
GBA 3 Exam |100 Questions| With Correct Solutions!! 2026/2027 -- 2026/2027 | Passing Score: 75% | Page 2 of 52
, Correct Answer: D
Rationale:
Under ASC 842, finance leases require recognition of a right-of-use asset and lease liability at present
value. The first payment reduces the liability immediately since it is made at commencement. Recording
undiscounted payments, treating it as operating rent without recognition, or omitting the liability all violate
the standard.
Q5 Question 5 of 100
Q5. A publicly traded company issues $5,000,000 of 6% bonds at 102 on January 1 when
the market rate is 5.2%. The bonds pay interest semiannually and mature in 10 years. The
CFO needs to determine how the premium affects interest expense over the bond's life.
A. The premium is amortized over the bond's life, reducing interest expense below the cash
interest paid each period
B. The premium is amortized over the bond's life, increasing interest expense above the cash
interest paid each period
C. The premium is recorded as a separate gain in the year of issuance and does not affect
future interest expense
D. The premium remains as a separate liability until maturity and is then written off as an
adjustment to retained earnings
Correct Answer: A
Rationale:
When bonds are issued at a premium, the premium is amortized over the life of the bonds, reducing
interest expense below the cash interest paid. Using the effective interest method, interest expense
equals the carrying amount times the market rate, which is lower than the cash payment. The premium is
not a separate gain and must be amortized.
Q6 Question 6 of 100
Q6. A corporation declares a 15% stock dividend when the market price of its common stock
is $48 per share and the par value is $10. There are 200,000 shares outstanding before the
dividend. The controller must determine the correct accounting for this stock dividend under
GAAP.
A. Debit retained earnings for $300,000 equal to the par value of the additional shares issued
B. Debit retained earnings for $1,440,000 and credit common stock and paid-in capital for the
par value and excess respectively
C. Debit retained earnings for $1,440,000 and credit common stock only at par value with no
additional paid-in capital
D. Record the stock dividend as a memorandum entry only since no cash is distributed to
shareholders
GBA 3 Exam |100 Questions| With Correct Solutions!! 2026/2027 -- 2026/2027 | Passing Score: 75% | Page 3 of 52
