BUSINESS STUDIES PAPER 1 - 2019 MOKASA II MOCK EXAMINATION

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Instructions to candidates

  1. Write your name, class and admission number in the spaces provided above
  2. Answer all the questions
  3. All answers should be written in the spaces provided in this paper
  4. Check the question paper to ascertain that all questions are printed
  5. Answer the questions in English
  1. Outlinefour reasons why filing is an important function of an organization.(4marks)
    1. ……………………………………………………………………………………………
    2. ……………………………………………………………………………………………
    3. ……………………………………………………………………………………………
    4. ……………………………………………………………………………………………
  1. Koech started a business dealing in ladies clothing ten years ago. His business has gradually been growing and making more profits. Outline four reasons that may account to this.                                                                                                             (4 marks)
    1. ……………………………………………………………………………………………
    2. ……………………………………………………………………………………………
    3. ……………………………………………………………………………………………
    4. ……………………………………………………………………………………………
  1. The table below contains descriptions of some goods. Classify them as Consumer, Intermediate, Free goods or Capital goods.  (4marks)

    Description

    Classification

    a)Goods used in the production of other goods but does not form part of the finished products

     

    b)Goods that are in their final state of usage

     

    c)Goods that are abundant in supply and have no monetary value

     

    d)Goods that are not ready for use before they are further processed

     
  1. Outline four factors that determine the amount of money held by an individual for speculative motive.  (4 marks)
    1. ……………………………………………………………………………………………
    2. ……………………………………………………………………………………………
    3. ……………………………………………………………………………………………
    4. ……………………………………………………………………………………………
  1. Outline four examples of open trade credit used in home trade. (4marks)
    1. ……………………………………………………………………………………………
    2. ……………………………………………………………………………………………
    3. ……………………………………………………………………………………………
    4. …………………………………………………………………………………………
  2. Using a (+) for increase, (-) for decrease and (0) for no effect , indicate the effects of the following transactions on Assets , Liabilities, Capital and the balance sheet totals.     (4 marks)

    Time

    January

    February

    March

    April

    Price (shs)

    120

    120

    120

    120

    Quantities demanded

    6,000

    4,000

    2,800

    2,000
  1. Outline four reasons that may have led to the change in quantities demanded of commodity X in the market as shown in the schedule below. (4marks       
    1. ……………………………………………………………………………………………
    2. ……………………………………………………………………………………………
    3. ……………………………………………………………………………………………
    4. ……………………………………………………………………………………………
  1. Highlight four reasons why the government may decide to reduce her shareholding in public corporations to a level below 50%.                                                         (4 marks)……………………………………………………………………………………………   
  1. The capital of Kimosop traders on 1st January 2018 was shs. 85,000. During the year, additional investments of shs.50,000 and drawings of shs.60,000 were made. The capital as at 31st Dec 2018 was 65,000. Calculate Kimosop trader’s profits or loss.(4 marks)
    ……………………………………………………………………………………………
    ……………………………………………………………………………………………
    ……………………………………………………………………………………………
  1. State how the following components are treated in the measurement of national income.                                                                                                           (4marks)

    National income component

    State whether added or subtracted

    a). Transfer Payments

     

    b). Depreciation

     

    c). Subsistence farming

     

    d). Net income from Abroad

     
  1. State four differences between ordinary shares and preference shares. (4 marks)
    1. ……………………………………………………………………………………………
    2. ……………………………………………………………………………………………
    3. ……………………………………………………………………………………………
    4. ……………………………………………………………………………………………   
  1. State four circumstances under which the use of face to face communication may be appropriate.                                                                                                     (4 marks
    1. ……………………………………………………………………………………………
    2. ……………………………………………………………………………………………
    3. ……………………………………………………………………………………………
    4. ……………………………………………………………………………………………

13.Highlight four disadvantages of using sea transport.                                           (4 marks)

  1. ……………………………………………………………………………………………
  2. ……………………………………………………………………………………………
  3. ……………………………………………………………………………………………
  4. ……………………………………………………………………………………………

14.Outline four circumstances under which a intermediaries is used in distribution of a                  firms products.                                                                                                (4 marks

  1. ……………………………………………………………………………………………
  2. ……………………………………………………………………………………………
  3. ……………………………………………………………………………………………
  4. ……………………………………………………………………………………………
  1. Balance the following ledger accounts and extract a trial balance as at 30th June 2015  (4 marks)
    snip566
  1. State four causes of structural unemployment. (4marks)
    1. ……………………………………………………………………………………………
    2. ……………………………………………………………………………………………
    3. ……………………………………………………………………………………………
    4. ……………………………………………………………………………………………
  1. Highlight four characteristics of a public warehouse. (4 marks)
    1. ……………………………………………………………………………………………
    2. ……………………………………………………………………………………………
    3. ……………………………………………………………………………………………
    4. ……………………………………………………………………………………………
  1. The following balance sheet belongs to Rivatex Traders.

Rivatex
Balance Sheet
As at 30th June 2019

Fixed Assets                          sh                 sh

Premises                               90,000

Furniture and Fixtures         70,000

Land                                   140,000300000

Current Assets

Cash                                     7000

Stock                                  15000

Bank                                     10000

Pre-paid rent                         25000   57000

357,000

                                                 Sh                  

Capital                               120,000

Add Profit                           30,000

Net Capital                       150,000

Long Term Liabilities

5 year bank loan               200,000

Short term liabilities

Bank overdraft                    7,000

357,000

 

           

Required: Calculate

  1. Working Capital        (1 mark)
  2. Borrowed Capital     (1 mark)
  3. Capital Employed            (1 mark)
  4. Capital invested             (1 mark)
  1. State four levels of inflation. (4marks)
    1. ……………………………………………………………………………………………
    2. ……………………………………………………………………………………………
    3. ……………………………………………………………………………………………
    4. ……………………………………………………………………………………………
  2. The following statements relates to a description of a certain type of tax. Identif the tax and classify it as either direct or indirect tax.    (4marks)
     

    Description

    Tax

    Classification

    (a)

    A tax that is imposed on goods that are manufacture and sold within a country.

       

    (b)

    Tax usually levied on profits of companies

       

    (c)

    Tax levied on the value that a business adds to a product.

       

    (d)

    Tax levied on personal wealth that goes beyond a certain limit.

       
  3. Record the following transactions in the relevant journals                       (4 marks)
    2019
    Feb 2: Bought goods on Credit worth shs6500 from Eldolink suppliers
    Feb 8: Sold goods worth shs5000 on credit to Jamal.
    Feb 12: Sold stock valued at shs8500 on credit to Musyoka
    Feb 16: Bought goods worth shs3000 on credit from Jetlink traders
  4. John and Peter bought a Nissan matatu worth sh. 3,000,000. John paid sh. 2,000,000 and Peter sh. 1,000,000. They insured the matatu for a comprehensive cover for shs2,500,000. Later the matatu was involved in an accident to a loss of sh 1,500,000. How much were they compensated and give reasons in support of your answer? (4 marks)
  1. Outline four reasons why subsistence production is discouraged in many countries.  (4 marks)
    1. ……………………………………………………………………………………………
    2. ……………………………………………………………………………………………
    3. ……………………………………………………………………………………………
    4. ……………………………………………………………………………………………
  1. Highlight four features of an Oligopoly market structure.                   (4 marks)
    1. ……………………………………………………………………………………………
    2. ……………………………………………………………………………………………
    3. ……………………………………………………………………………………………
    4. ……………………………………………………………………………………………
  1. Describe the following terms of sale as used in international trade. (4 marks)
    1. LOCO…………………………………………………………………………………….
      ………………………………………………………………………………………………
    2. Free Alongside Ship …………………………………………………………………..
      ………………………………………………………………………………………
    3. Cost & Freight…………………………………………………………………………...
      ………………………………………………………………………………………………
    4. Franco……………………………………………………………………………………
      ………………………………………………………………………………………………


MARKING SCHEME

  1. Outline four reasons why filing is an important function of an organization.            (4mks)
  • Documents are protected from loss and landing into un authorized hands.
  • It aids in  office tidiness and efficiency
  • Documents are kept neat and tidy
  • An important aid to memory- reference can be made anytime and in future.
  • Ensures that information is stored systematically and thus can   be retrieved easily when needed.
  1. Koech started a business dealing in ladies clothing ten years ago. His business has gradually been growing and making more profits. Outline four reasons that may account to this.
  • Adequate capital
  • Availabilities of adequate labour
  • Proper marketing plans
  • Fair competition       
  • Use of modern technology
  • Political stability
  • Adequate market
  • Appropriate pricing policies
  • Good time management
  • Good infrastructure
  • Proper business planning
  • Good customer relations
  • Favourable government policies         
  1. The table below contains descriptions of some goods. Classify them as either Consumer, Intermediate, Free goods or Capital goods.                                                                                                                                                                                      (4marks)

Description

Classification

a)Goods used in the production of other goods but does not form part of the finished products

Capital  goods

b)Goods that are in their final state of usage

Consumer goods

c)Goods that are abundant in supply and have no monetary value

Free goods

d)Goods that are not ready for use before they are further processed

Intermediate goods

4. Outline four examples of open trade credit used in home trade.    (4mks)

  • Simple credit (prompt cash)
  • Monthly credit
  • Budget accounts
  • Trade credit
  • Credit card facilities
  1. Outline four factors that determine the amount of money held by an individual for speculative motive.
  • Level of income
  • Individual s temperament (pessimistic/optimistic)
  • Duration between incomes
  • Family status
  • Number of dependants.
  1. Using a (+) for increase, (-) for decrease and (0) for no effect , indicate the effects of  the following transactions on Assets , Liabilities, Capital and the balance sheet totals.                                                                                                                                                                  (4 marks)

Description

Assets

Liabilities

Capital

Balance sheet totals

a)Bought goods worth 5000/=on credit

+

+

0

+

b)Sold goods worth 7000/= for 8000/= Cash

+

0

+

+

c)The Proprietor took goods worth 2000/= for personal use

-

0

-

-

d)The Proprietor donated personal motor vehicle to the business

+

0

+

+

 

         7.Outline four reasons that may have led to the change in quantities demanded of commodity X in the market as shown in the schedule below. (4mks)

Time

January

February

March

April

Price (shs)

120

120

120

120

Quantities demanded

6,000

4,000

2,800

2,000

  • Decrease in consumer’s income
  • Consumers may have expected a further decrease in prices
  • There might have been decrease in the general population
  • Government may have increased the taxation on that commodity
  • Consumers may have developed a dislike to the commodity i.e. of fashion
  • There might have been increase in the price of complimentary goods
  • There might have been a decrease in the price of substitute to the commodity
  1. The capital of Kimosop traders on 1st January 2018 was shs. 85,000.  During the year, additional investments of shs.50,000 and drawings of shs.60,000 were made.  The capital as at     31st Dec 2018 was 65,000.  Calculate Kimosop trader’s profits or loss. (4 marks)

            CC       =         OC + P + 1 – D

            P          =         CC – OC – 1 + D

                        =         65,000 – 85,000 – 50,000 + 60,000

                        =         -10,000

                        =         Loss = 10,000

  1. Highlight four reasons why the  government may decide to reduce her shareholding in public             corporations to a level below 50%.                                                  (4 marks)
  • To raise government revenue
  • To reduce the tax burden of financing poor performing parastatals
  • To encourage healthy competition among the businesses into the country
  • To improve on the management in the running of the businesses
  • To deal with the problem of corruption, misuse of funds and mismanagement of resources in parastatals
  • Increased private sector participation

     10. State how the following components are treated in the measurement of national income. (4marks)

National income component

State whether added or subtracted

a). Transfer Payments

Subtracted

b). Depreciation

Subtracted

c). Subsistence farming

Added

d). Net income from Abroad

Added

  1. State four differences between ordinary shares and preference shares.

Preference shares

Ordinary shares

- Have a fixed rate of sharing dividends

- Have a prior claim of dividends over ordinary shares

-  Have no rating rights

-  If the company is liquidated, they are paid first.

-cummulative

-may be redeemable

-  No fixed rate of sharing dividends

-  Have a claim of dividends after preference shares

-  have voting rights

-  If the company is liquidated they are paid laid

-non cumulative

-non-redeemable

  1. State four circumstances under which the use of face to face communication may be   appropriate.   (4 marks)
  • When there is need for immediate feedback
  • If the message being passed is confidential
  • When there is need to persuade and convince the other person
  • When addressing a large number of people at once e.g when in a meeting
  • When the parties involved are close to each other
  • When the message being communicated is informaTION

13. Highlight four disadvantages of using sea transport. (4marks)

  • It is very slow hence not suitable for transporting perishable and agent goods and services
  • It is not flexible as it does not offer door to door services
  • Ships are very expensive to buy and maintain hence many countries cannot afford
  • It is very expensive to construct and maintain a port hence many countries cannot afford
  • Water transport is easily disrupted by poor weather e.g. rainstorms, strong winds
  • Water transport is only used where there is water.
  • Some water ways might not be navigable especially if they have rapids, dangerous animals and hyalines
  • It is expensive to provide facilities at the port hence many countries cannot afford
  • It may be affected by piracy which causes great loses
  1. Outline four circumstances under which a intermediaries is used in distribution of   a firms products.
    • Where the market is widely spread out.
    • Where the market is full of risks
    • Where it is a government policy
    • Where the producer lacks storage facilities
    • Where the producer wishes to specialize in production and leave distribution function to intermediaries.
    • Where it is means used by competitors
    • Where there is need to break bulk
    • Where the firm produces large quantity of commodities.
    • Where the products are not perishable
    • where the firm cannot afford to sell directlY       
  1. Balance the following ledger accounts and extract a trial balance.

           snip566  

P1 Q55

   16.  State four causes of structural unemployment.   (4mks)

  • Change in the method of production/mechanization/capital intensive methods
  • Technological change
  • Widespread change in government policies
  • Decrease in demand for products
  1. Highlight four characteristics of a public warehouse.  (4 marks)
    • A rental fee is charged on goods stored.
    • Strategically located near road junctions, bus stations, airports, railway stations border points and sea ports.
    • Goods are prepared for sale through branding and packing
    • Goods are insured against risks such as damages by fire and theft
    • Goods can be sold without their physical movement from the warehouse.
    • more Documentation
    • The owner of the goods have no direct control over the goods stored.
    • They are situated far away from the liner’s premises
  1. The following balance sheet belongs to Rivatex Traders.

Rivatex

Balance Sheet

As at 30th June 2019

Fixed Assets shsh

Premises                              90,000

Furniture and Fixtures        70,000

Land                                  140,000    300000

Current Assets

Cash                                      7000

Stock                                    15000

Bank                                     10000

Pre-paid rent                         25000    57000

357000

Sh

Capital                               120,000

Add Profit                           30,000

Net Capital                         150,000

Long Term Liabilities

5 year bank loan                200,000

Short term liabilities

Bank overdraft                     7,000

 357,000

Required: Calculate

            i)Working Capital  (1 mark)

                        W.C= C.A- C.L

                        57,000-7000= 50,000

            ii)Borrowed Capital (1 mark)

                        L.T.L= 200,000

            iii)Capital Employed  (1 mark)

                        T.A-C.L

                        357000-7000=350,000

            iv)Capital Owned   (1 mark)

                        Shs120,000

     19. State four levels of inflation. (4mks)

  • Hyper/runaway inflation
  • Galloping/rapid inflation
  • Stagflation
  • Creeping/Mild/moderate inflation

     20. The following statements relates to a description of a certain type of tax.  Identify the tax and classify it as either direct or indirect tax.

 

Description

Tax

Classification

(a)

A tax that is imposed on goods that are manufacture and sold within a country.

Excise duty

Indirect

(b)

Tax usually levied on profits of companies

Corporation tax

Direct

(c)

Tax levied on the value that a business adds to a product.

Value added tax (V.A.T)

Indirect

(d)

Tax levied on personal wealth that goes beyond a certain limit.

Wealth tax

Direct

  1. Record the following transactions in the relevant journals   (4 marks)

            2019

            Feb 2: Bought goods on Credit worth 6500/= from Eldolink suppliers

            Feb 8: Sold goods worth 5000/= on credit to Jamal.

            Feb 12: Sold stock valued at 8500/= on credit to Musyoka

            Feb 16: Bought goods worth 3000/= on credit from Jetlink traders

                                    Purchases Journal                       

 P1 Q20

                                                Sales Journal

Date

Particulars

Invoice No.

Ledgers Folio

Amount

2019

Feb 8

Feb 12

Jamal

Musyoka

Totals posted to Sales a/c (Cr)

    5000

8500

13500

22.John and Peter bought a Nissan matatu worth sh. 3,000,000.  John paid sh. 2,000,000   and Peter sh. 1,000,000.  They insured the matatu for a comprehensive cover for 2,500,000. Later the matatu was involved in an accident to a loss of sh 1,500,000.  How        much were they compensated and give reasons in support of your answer?

            Compensation =                     Sum insured   x  Value loss

                                                Actual value of the property

                        2,500,000 x 1,500,000

                          3,000,000                             = shs1,250,000

 

            For @  John -  2/3  x  1,250,000   = shs833,333

                        Peter - 1/3 x 1,250,000     =shs416,667

                        Reason: Under insurance

  1. Outline four reasons why subsistence production is discouraged in many                                        countries.                                                                                             (4 marks)
  • Leads to production of low quantity and quality goods
  • It discourages invention and innovation
  • Limited variety of goods is produced
  • Lowleves of technology is applied
  • Wastage of time as one moves from one productive activity to another
  1. Highlight four features of an Oligopoly market structure.                    (4 marks)
  • Few large scale sellers
  • Barriers to entry of new firms in the market
  • Firms are price givers or makers
  • There is price rigidity causing a kinked demand curve
  • There can be pure oligopoly where products are identical or differentiated through branding
  • Goods dealt in are close substitutes
  • There may be price wars
  • Tacit collusion
  • There may be non price competition
  • Firms are interdependent in terms of price,market share and output decision.
  1. Describe the following terms of sale as used in international trade.        (4 marks)
    1. LOCO……………………………………………………………………………………
      ………………………………………………………………………………………………
    2. Free Alongside Ship ……………………………………………………………………..
      ……………………………………………………………………………………………..
    3. Cost & Freight…………………………………………………………………………...
      ………………………………………………………………………………………………
    4. Franco……………………………………………………………………………………………………

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