Business Studies Paper 1 Questions and Answers - Lanjet Joint Mock Exams 2020

INSTRUCTIONS TO STUDENTS

1. Write your name admission number in the spaces provided above
2. This paper contains 25 questions. Check the question paper to ascertain all pages and questions are there. Write your answers in the spaces provided
3. Answer all questions in English

1. Amina complains to her friend that these days she is finding it increasingly hard to satisfy her needs. Give four reasons why she may be facing such a situation.
   
   1. ……………………………………………………………………………………………
   2. …………………………………………………………………………………………
   3. ……………………………………………………………………………………………
   4. ……………………………………………………………………………………………
2. A resource is something that is used by a business to achieve an objective. Identify four resources available in a business. (4mks)
   
   1. ……………………………………………………………………………………..
   2. …………………………………………………………………………………….
   3. ……………………………………………………………………………………..
   4. ……………………………………………………………………………………….
3. State four factors that an entrepreneur would consider before investing in a business opportunity
   
   1. ………………………………………………………………………………………………
   2. ……………………………………………………………………………………………
   3. ……………………………………………………………………………………………
   4. ………………………..……………………………………………………………………
4. The quantity demanded and supplied of a certain commodity can be expressed as Qd=50+20p and QS= 20+16p respectively.
   Find
   
   1. Equilibrium price (2marks)
   2. Equilibrium quantity ( 2 marks)
5. The table below shows the growth rate of Gross Domestic product (GDP) of a certain Country for two years
   

   Year	G.D.P
   2003	4.0%
   2005	6.5%

   Highlight four circumstances under which the standards of living of the citizens of the country referred to above may not necessarily have been higher in 2005 than 2003. (4mks)
   1. ………………………………………………………………………………………..
   2. ………………………………………………………………………………………..
   3. ………………………………………………………………………………………..
   4. ………………………………………………………………………………………….
6. Outline four sources of monopoly power. (4 marks)
   1. ……………………………………………………………………………
   2. ……………………………………………………………………………
   3. ……………………………………………………………………………
   4. …………………………………………………………………………….
7. State any four money transfer facilities offered by commercial banks (4mrks
   
   1. ……………………………………………………………………………
   2. ……………………………………………………………………………
   3. ……………………………………………………………………………
   4. …………………………………………………………………………….
8. State four benefits of warehousing to consumers (4mrk)
   
   1. ……………………………………………………………………………
   2. ……………………………………………………………………………
   3. …………………………………………………………………………
   4. …………………………………………………………………………….
9. Indicate the source document and the book of original entry in which each of the following transaction should be recorded (4 mrks)
   

   No.	transaction	source	Book of original entry
   a	Purchase of goods on credit
   b	Payment of cash to a creditor
   c	Sale of goods on credit
   d	Sale of fixed asset on credit

10. The cost of consumer goods and services for a representative basket of an average family is given below.
    

    Year	2012	2013
    Prices	Kshs. 1200	Kshs .1600

    Determine the increase in consumer price index using 2012 as the base year
11. Write down four differences between ordinary shares and preferential shares (4mrks)
12. Mango Traders had the following ledger account balances as at 31st December 2019.
                                    Ksh.
    Sales                    100,000
    Purchases             170,000
    Returns inwards      10,000
    Returns outwards    20,000
    Salaries                  30,000
    Capital                   40,000
    Bank loan               50,000
    Prepare the business trial balance as at 31 December 2019. {4marks}
13. Outline four positive implications of a youthful population to an economy. {4 marks}
    
    1. ……………………………………………………………………………
    2. ……………………………………………………………………………
    3. ……………………………………………………………………………
    4. …………………………………………………………………………….
14. Outline four barriers to verbal communication 4 marks}
    
    1. ……………………………………………………………………………
    2. …………………………………………………………………………
    3. ……………………………………………………………………………
    4. …………………………………………………………………………….
15. Highlight four positive impacts of physical environment on operations of a business
    1. ……………………………………………………………………………
    2. ……………………………………………………………………………
    3. ……………………………………………………………………………
    4. …………………………………………………………………………….
16. Sherry traders had the following assets and liabilities as at 1st January 2004
                            shs
    Furniture    350,000
    Debtors        45,000
    Cash              7,000
    Creditors      48,000
    For the year ended 31stDecember 2004,
    
    1. Additional capital was shs 24,000
    2. Drawings were shs 20,000
    3. Net profit was shs34,000
       Determine capital at 31st December, 2004
17. Give four basic characteristic features of a business idea ( 4 mrks)
    
    1. ……………………………………………………………………………
    2. ……………………………………………………………………………
    3. ……………………………………………………………………………
    4. …………………………………………………………………………….
18. State four reasons why a producer may involve wholesaler in distributing products ( 4 mrks)
    
    1. ……………………………………………………………………………
    2. ……………………………………………………………………………
    3. …………………………………………………………………………
    4. …………………………………………………………………………….
19. State four factors that determine the premiums charged by insurance companies for life policies( 4 mks)
    
    1. ……………………………………………………………………………
    2. ……………………………………………………………………………
    3. ……………………………………………………………………………
    4. …………………………………………………………………………….
20. State four methods used in trade restrictions. ( 4 mrks)
    
    1. ……………………………………………………………………………
    2. ……………………………………………………………………………
    3. ……………………………………………………………………………
    4. …………………………………………………………………………….
21. Highlight four ways in which emergence of COVID- 19 infections negatively affected business operations in Kenya ( 4 mrks)
    1. …………………………………………………………………………
    2. ……………………………………………………………………………
    3. ……………………………………………………………………………
    4. …………………………………………………………………………….
22. Write the account to debit and credit in the following transactions (4 mrks)
    

    	transaction	a/c to debit	a/c to credit
    a	Returned damaged goods to supplier
    b	Received rent by cheque
    c	Took cash for personal use
    d	Customer returned ordered goods

23. Highlight four characteristics of lab our as a factor of production ( 4 mrks)
    
    1. ……………………………………………………………………………
    2. ……………………………………………………………………………
    3. ……………………………………………………………………………
    4. …………………………………………………………………………….
24. Mention four adverse effects of inflation ( 4 mrks)
    
    1. ……………………………………………………………………………
    2. ……………………………………………………………………………
    3. ……………………………………………………………………………
    4. …………………………………………………………………………….
25. The following information relates to Kamautraders for the month of December 2019
    Dec 1: sold goods for shs. 45,000 less 10% cash discount
    Dec 5: bought goods worth shs 40,000 in cash and was allowed a discount of 5%
    Dec 7: a debtor paid shs 20,000 in settlement of a debt of shs. 23,000by cheque
    Dec 15: sold goods shs. 20,000 on credit to Jambo traders
    Dec 26: paid rent shs. 16,000 by cheque
    Post the above transactions in relevant journals

MARKING SCHEME

1. Amina complains to her friend that these days she is finding it increasingly hard to satisfy her needs. Give four reasons why she may be facing such a situation.
   
   1. Her wants are repetitive
   2. They are complimentary
   3. Some may be habitual
   4. Wants are too many/ unlimited
   5. She may be unemployed
   6. Prices of resources may be too high Any 4 @√x4 = 4mks
2. A resource is something that is used by a business to achieve an objective. Identify four resources available in a business. (4mks)
   1. Human resources
   2. Technological resources
   3. Financial resources
   4. Physical resources Any 4 @√x4 = 4mks
3. State four factors that an entrepreneur would consider before investing in a business opportunity
   
   1. Capital required
   2. Returns/profitability
   3. Market size
   4. Competition level
   5. Government policy
   6. Political stability (security)
      Any 4 @√x4 = 4mks
4. The quantity demanded and supplied of a certain commodity can be expressed as Qd=50+20p and QS= 20+16p respectively.
   Find
   
   1. Equilibrium price (2marks)
      50+20p = 20+16p
      20p-16p = 50 -20
      4p= 30
      P= 7.5
   2. Equilibrium quantity ( 2 marks)
      Q = 50+ 20p
      = 50 + 20(7.5)= 200 units
5. The table below shows the growth rate of Gross Domestic product (GDP) of a certain Country for two years
   

   Year	2012	2013
   Prices	Kshs. 1200	Kshs .1600

   Highlight four circumstances under which the standards of living of the citizens of the country referred to above may not necessarily have been higher in 2005 than 2003. (4mks)
   Problems of per capita income as a measure of stds living
   1. Population may have overworked
   2. Leisure time not provided for the working population
   3. Inequitable distribution of income
   4. Data used may be inaccurate
   5. Rise in general price levels
   6. If there is a rise in expenditure on non-productive govt activities
   7. Rise in population
      Any 4@ 1mk x 4 = 4mks
6. Sources of monopoly power.
   
   1. The firm may have the sole right to a technique used in production.
   2. A firm may control a strategic input or entire raw material used in the production of a commodity.
   3. The initial capital investment required to set up a firm in a given line of production is very high and only one firm which can afford.
   4. The firm may grow very big that it enjoys extensive internal economies of scale hence able t reduce cost of production.
   5. The government may set up a parastatal and give it exclusive rights to produce.
   6. A group of firms merge into one huge firm by combining all their operations.
   7. If the firm has patent/copy rights which bans other firms from producing/selling the product. (Any 4 x 1 = 4 marks)
7. Money transfer facilities offered by commercial banks
   
   1. Standing orders
   2. Credit transfers
   3. Telegraphic transfers
   4. Electronic fund transfers
   5. Mobile money transfers
   6. Bankers cheques
   7. Travelers cheques
   8. Credit cards
8. Benefits of warehousing to consumers
   
   1. Ensures steady flow of goods
   2. Enjoy stable prices
   3. Goods are protected from physical damage
   4. May enjoy goods that are of high quality
   5. They are able to get seasonally produced goods throughout the year
   6. Some goods lose weight in the store hence the consumer may pay less
   7. Consumers are able to get goods that are not produced locally
9. 
   

   No.	transaction	source	Book of original entry
   a	Purchase of goods on credit	Invoice received	Purchases journal
   b	Payment of cash to a creditor	Receipt received	Cash payment journal
   c	Sale of goods on credit	Invoice issued	Sales journal
   d	Sale of fixed asset on credit	Receipt issued	General journal

10. let 2012 be 100%
    CPI= CURRRENT YEAR × 100
                BASE YEAR
    = 1600 × 100= 133.33% PRICES INCREASED BY 33.33%
       1200
11. differences between ordinary shares and preference shares
    

    Ordinary shares	Preference shares
    Do not get fixed return Owners have voting rights Their returns are not cumulative Ordinary share holders are real owner of company Share holders participate in management On dissolution their capital is paid back after preference shares	Carry a fixed rate of return Owners have no voting rights Their returns are cumulative Preference share holders are quasi owners of company Do not participate in management On dissolution they are given preference in receiving back their capital

12. Mango traders
    Trial balance
    As at 31st Dec 2019
    

    Details	Debit	Credit
    Sales Purchases Returns inwards Returns outwards Salaries Capital Bank loan	170,000 10,000 30,000	100,000 20,000 40,000 50,000
    Total	210,000	210,000

13. Outline four positive implications of a youthful population to an economy. {4 marks}
    
    1. High dependency ratio
    2. Strain on government to provide education and health care
    3. High demand for goods required by the youth
    4. High birth rates
    5. Low standards of living
    6. low investments on development infrastructure as funds are channeled towards social services
14. Outline four barriers to verbal communication
    
    1. poor listening
    2. Lack of common language
    3. Poor timing
    4. Negative attitude
    5. Distortion of message through incorrect means
15. Highlight four positive impacts of physical environment on operations of a business
    
    1. Favorable climatic conditions favour agriculture
    2. Good terrain favour construction of business structures
    3. Absence of floods means goods can efficiently reach the market
    4. good roads and physical infrastructure enhance trade
16. A= C + L
    C= A – L = (350,000 + 45,000+ 7,000) – (48,000) = SHS. 354,000
    Therefore opening capital = SHS. 354,000
    C.C= O.C + I + P – D
    = 354,000+ 24,000 + 34,000 – 20,000 = SHS. 392,000
17. Give four basic characteristic features of a business idea
    
    1. What product or services to sell
    2. The market to sell goods and services
    3. How the business will run
    4. The pricing of products
    5. The objectives to be met
18. State four reasons why a producer may involve wholesaler in distributing products ( 4 mrks)
    
    1. To save producer problem of storage
    2. To relieve producer problem of transport
    3. To reduce risks such as fall in price
    4. To conduct market research
    5. To prepare goods for sale
    6. To facilitate product promotion
    7. To get finances
19. State four factors that determine the premiums charged by insurance companies for life policies( 4 mrks)
    
    1. Age of the assured
    2. Occupation
    3. Sum assured
    4. Health status
    5. Frequency of occurrence of the risk assured
    6. Residence of assured
20. State four methods used in trade restrictions. ( 4 mrks)
    
    1. custom import duty
    2. quotas
    3. total ban
    4. trade agreements
    5. administration controls
    6. foreign exchange control
21. Highlight four ways in which emergence of COVID- 19 infections negatively affected business operations in Kenya
    
    1. It lead to closure of some businesses
    2. restricted movement of goods and people
    3. Extra costs incurred to enhance sanitation
    4. Loss of jobs as companies ccaled down operations
    5. Panic buying led to shortage of some commodities e.g sanitizers
    6. Policy of social distance affected businesses such as clubs
    7. loss of foreign market for exports such as flowers
    8. Unsteady flow of imports
    9. general uncertainties
22. Write the account to debit and credit in the following transactions
    

    	transaction	a/c to debit	a/c to credit
    a	Returned damaged goods to supplier	purchases	Returns outward a/c
    b	Received rent by cheque	bank	Rent income a/c
    c	Took cash for personal use	drawings	Cash a/c
    d	Customer returned ordered goods	goods	Returns inward a/c Sales a/c

23. Highlight four characteristics of labour as a factor of production ( 4 mrks)
    
    1. Its a basic factor of production
    2. Can not be stored
    3. Cannot be separated from the labourer
    4. labourer sell labour but not themselves
    5. labour is mobile
    6. labour is human with ability to think and get annoyed
24. Mention four adverse effects of inflation ( 4 mrks)
    
    1. reduction in profit
    2. wastage of time shopping around
    3. conflict between employer and employee
    4. decline in standards of living
    5. Loss to creditors
    6. loss of confidence in monetary systems
    7. low level of savings and investiment
25. cash receipts journal
    

    DATE 2019	DETAILS	RCT NO.	LF	DISCOUNT ALLOWED	CASH( SHS.)	BANK(SHS.)
    Dec 1	sales			4,500	40,500
    Dec 17	debtor			3,000		20,000
    Dec 15	Sales					70,000
    				7,500	40,500	90,000

    
    Cash payments journal
    

    DATE 2019	DETAILS	RCT NO.	LF	DISCOUNT ALLOWED	CASH( SHS.)	BANK(SHS.)
    Dec 5	Purchases			200	3,800
    Dec 6	Rent			200		16000
    				400	3,800	1,600