Scenario 18.2 Use the Following to Answer the Questions

question 191

Multiple Choice

Scenario 18.2
Use the following to answer the questions.
The State Farm Group includes several companies.Probably the most well-known company in the group is the State Farm Insurance company,the largest auto and home insurer in the United States.State Farm Insurance provides protection for approximately 78 million policies on auto,fire,life,and health services.It is also a leading insurer of homes and autos in Canada.Another company in the State Farm group is the State Farm Bank,which was opened in 2000,beginning State Farm's entry into the financial services field.However,the State Farm Bank is not a traditional bank,in that it has no branch offices and its services are provided through State Farm agents,a call center,the mail,and on the Internet.It currently serves over 1.9 million bank accounts.
-Refer to Scenario 18.2.When deciding on its advertising allocation for the coming year,State Farm Insurance could choose to spend the same amount as Safe Auto,another auto insurance company,or it could allocate an amount that is 10% of last year's premiums.If State Farm uses the same amount as Safe Auto,this method of advertising appropriation is known as the ____ approach;if State Farm uses the amount based on last year's premiums,the method would be _____.

• A)competition-matching;percent-of-sales.
• B)arbitrary;competition-matching.
• C)competition-matching;objective-and-task
• D)arbitrary;objective-and-task
• E)objective-and-task;percent-of-sales

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Definitions:

Petty Cash Fund

A small amount of cash kept on hand for minor or incidental expenses.

Voucher System

A control mechanism in accounting that involves authorization and documentation before a financial transaction is made.

General Journal Entries

Basic accounting records where all day-to-day financial transactions of a business are initially recorded, before being transferred to specific accounts in the general ledger.

Purchase Discounts Lost

Purchase discounts lost refer to the additional amount paid by a buyer for failing to take advantage of the early payment discount offered by a supplier.