Business Studies Paper 2 Questions and Answers - Lanjet Joint Mock Exams 2020

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INSTRUCTIONS TO STUDENTS

Write your name admission number in the spaces provided above
This paper contains 6 questions. Check the question paper to ascertain all pages and questions are there. Write your answers in the spaces provided
Answer all questions in English

Answer any Five Questions

1. Discuss any five economic importance of the recently discovered oil to the Kenya Economy. (10marks)
2. Describe five monetary tools used by the government to control inflation. (10marks)

Explain four reasons why Boda Boda transport has become a popular means of transport in Kenya. (8 marks)

The following trial balance relates to HM Traders Ltd as at 31st December 2011.
HM Traders Ltd
Trial Balance
As 31st December 2011

Particulars	Dr shs	Cr shs
Capital Drawings Cash at Bank Machinery Debtors Creditors Stock (1.1.2011) Sales Purchases Return inwards Return onwards Carriage inwards Carriage outwards Rent Salaries and wages Discounts Received General expenses.	8000 30,000 360,000 42 700 40000 325 000 10000 4000 5000 18000 40000 14,500 897 200	283,200 20 000 570 000 15000 9000 897 200

Stock as at 31/12/2011 was valued at shs. 35,000

Required:

Prepare a trading, profit and loss account for the year ended 31st December, 2011(8 marks)
Draw a balance sheet as at 31st December, 2011. (4 marks

1. Explain five consideration for proper use of County Funds (10 marks)
2. The following table represents the supply of potatoes for 3 months.
  
  Year 2010 Price Per Kg Quantity Supplied (Kgs)
  
  January 100 100,000
  
  February 100 90,000
  
  March 100 80,000
  
  Explain five reasons to account for the change in quantity supplied of potatoes in the market. (10 marks)
1. Mr Yego,a tea farmer in Kericho, wants to join Kiptigis farmers’ co-operative society. Explain five benefits that would accrue to him as a result of being a member of the society (10marks)
2. On 1st September 2006,Mau Enterprises had the following balance.
  
  Cash shs. 55,000
  Bank shs. 250,000 (CR)
  
  During the month, the following transaction took place
  September 2nd: Cash Sales Banked shs. 535,260
  3rd: Bought Ribbons in cash shs.4, 500
  8th: Paid Wangila ,a creditor shs. 94,000 by cheque in full settlement of his Account after deducting 6% cash discount
  12th: Received a cheque for shs.58, 800 from Wetu after allowing her cash discount of shs.1, 200
  15th: Paid salaries shs.34, 000 in cash
  25th: Withdrew shs. 50,000 from bank for office use
  28th: Anyango a debtor, paid her account of shs.75.000 by cheque less 10% cash discount.
  30th: Deposits all the cash into Bank except shs. 13,700
  Required: Prepare a three column cash Book as at 30th September 2006 (10mrks)
1. Explain five measures that Kenya can take to solve the problem of unemployment. (10 marks)
2. Kenya is looking forward to the realization of vision 2030, explain five obstacles that may hinder the successful implementation of the development plan. (10marks)
1. Draw five differences between perfect competition and monopolistic competition (10marks)
2. Explain five negative implications of production activities on the environment (10marks)

MARKING SCHEME

1. The economic importance of natural resources.
  - Oil provides raw materials for industries.
  - Oil bring foreign exchange to the country when exported.
  - They are a source of energy.
  - The exploitation of oil will create job opportunities for the unemployed
  - Development of auxiliary industries
  - Open up the area for infrastructural development
  - Source of revenue to the Government (5 x 2 = 10marks)
2. Monetary Tools the government can use to control inflation
  1. Open market operation, this is through sell of securities
  2. Margin requirement; varying of margin requirement e.g lowered margin requirement leads to reduced credit advance to borrowers.
  3. Cash ration. Increased cash ratio reduces the amount that the commercial banks are left to lend.
  4. Selective credit contro
  5. Compulsory deposits to the central bank by commercial banks
  6. Liquidity ration. Commercial banks may be required to increase proportion of liquid assets.
  7. Bank rate. Central bank increases the rate at which it lends to commercial bank;
  8. Moral suasion. Urging commercial to restrain lending
    1 mk mention, 1 mk explanation(Any 5 x 2 = 10mks)

Reasons for motor cycles popularity.
- Cheap to buy, hence affordable to many low income earners.
- Maintenance costs are low.
- Flexible means of transport which can offer door to door services.
- Cheap to hire as compared to other means e.g. motor vehicles.
- Convenient to the users, since they are readily available.
- fast /saves time. (4 x =8mark)

HM Traders
Trading, Profit and Loss Account√
For the year ended 31st December 2011

	Shs	Shs		Shs	Shs
Opening stock Add: purchases Less: Returns outwards Add : carriage inwards C.O.g.a.f.s Less: closing stock C.o.g.s Gross profit c/d Expenses Carriage outwards Rent Wages and salaries General expenses Net profit c/d	325000√ 15000√ 310,000 4,000√ 5000√ 18000√ 40000√ 14500√	40,000√ 314000 354000√ 35000√ 319000 241000√ 560,000 77500 172500√ 250,000	Sales Less : Returns inwards Net sales Gross profit b/d Discount received 570,000√	570,000 10,000	560,000 560,000 241000√ 9000√ 250,000

(16 x ½ = 8 marks)

HM Traders
Balance sheet
As at 31st December 2011

	shs	shs		shs	shs
Fixed Assets Machinery Current Assets Stock Debtors Bank	35000√ 42700√ 30000√	360,000√ 107 700 467 700	Capital Add: Net profit Less Drawings S.T.L creditors	283200√ 172500√ 455700 8000√	447700 20000√ 467700

( 8 x ½ =4 marks)

1. Explain five principles of public expenditure. (10 marks)
  1. Sanctions
    Public expenditure must be approved by the relevant authority.
  2. Maximum social benefit
    Should be incurred in a way that majority of the people are able to reap maximum benefit out of it.
  3. Adaptability
    Should be flexible enough to meet the prevailing economic situation
  4. Economy
    Should be incurred in the most economical way by avoiding any possible waste.
  5. Proper financial management
    Maintenance of proper records which should also be audited. The government should be accountable and transparent.
2. Factors that may cause a shift of supply curve S1S1 to S2S2.
  1. An increase in either costs of production or inputs such as raw material and labour will make producers to reduce production/force some producers out of market.
  2. In availability/inadequate factors of production.
  3. Decrease in price of a good produced jointly with commodity X.
  4. Increase in price of a commodity that may be produced in place of commodity X.
  5. Low levels of technology applied in production of the commodity.
  6. Increase in tax charged on commodity.
  7. Decrease in subsidies offered by government in production of the commodity.
  8. Future expectation that the price of the commodity will increase.
  9. Unfavorable climatic condition such was drought and floods especially if commodity is an agricultural commodity.

Benefits of joining a producer co-operative society
- She will be able to obtain better prices for her coffee
- Farm inputs on credit
- Cheap loans
- Better storage facilities
- Education on better methods of production
- Better and reliable transport means – feeder roads.
  Any five relevant points with explanation 2 x5 = 10mks

Mau ENTERPRISES
THREE CASH BOOK √
AS AT 30TH SEPTEMBER 2006

Date 2006

DETAILS

D.A

CASH

BANK

Date 2006

DETAILS

D.A

CASH

BANK

SEP

Balance b/d

55,000

SEP

Balance b/d

250,000√

Sales

53526

Ribbon

4,500√

1
2

Wetu

1,200√

58800√

wangila

6000√

94000√

2
5

Banks

50,000√

1
5

salaries

34,000√

2
8

Anyango

7500√

67500√

2
5

cash

50,000√

3
0

Cash

52800√

3
0

Bank

52800√

3
0

Bal. b/ d

13700√

320,360√

8,700

105,000

714360

6,000

105,000

714360

Oct

Balance b/d

13,700

320,360

20 ICKS X ½ = 10MKS
Any relevant points with explanation 2 x 5 = 10mks

1. Rural development - To reduce the rural - urban migration.
  - Adopting relevant education system - that equips school leavers with relevant skills and attitudes for the existing job opportunities.
  - Encouraging job creation through investment by encouraging job creation through investment by encouraging private investors.
  - Diversifying economic activities - In order to take care of structural and seasonal unemployment.
  - Population control - To reduce the rate of population growth.
  - Encouraging foreign investment.
  - Increasing government expenditure on investment projects.
    (8 x ½ =4 marks)
2. Challenges in realization of vision 2030
  - Lack of basic resources
  - Lack of political good will
  - Failure to involve the local people in plan formulation stage
  - Natural calamities
  - Over reliance on donor funding
  - Lack of co-operation and co-ordination between the executing parties and formulators.

Monopolistic	Perfect compensation
Firms produce / cell similar but differentiated products. Have their own price and out put policy Faced with normal demand curve Spend a lot of money in advertising Firms operate at excess capacity	Firms produce / sell homogeneous products They are price takers & output adjustors Perfectly elastic demand curve Firms do incur cost of advertising No excess capacity

(Matching differences Any 5x2=10mks)

Implication of production activities on the environment
1. Air pollution because toxic omissions
2. Water pollution due to refuse from production units
3. Noise pollution from production firms
4. Destruction of the landscape
5. Creation of green house effect because of too much smoke
6. Solid waste pollution which leave bid sites to watch
7. Social evils and crimes which come as a result of bring people together.