Business Studies Paper 2 Questions and Answers - Momaliche Joint Exams 2021/2022

INSTRUCTIONS TO CANDIDATES

• This paper consists of SIX questions
• Answer any FIVE questions.
• Write your answers in the answer booklet provided.
• All questions carry equal marks.

1.         
   1. Explain five features of a perfect market structure. (10mks)
   2. Explain five factors a firm will consider in choosing a method of product promotion (10mks)
2. Explain five differences between
   
   1. a public corporation and a public limited company . (10mks)
   2. On 1st August 2014, Jadelo traders had shs 20,000 cash and a bank overdraft of shs 30,000. During the month , the following transaction took place.
      2nd – additional investment of sh 50,000 cash into the business banked immediately. 3rd- cash sales amounting to sh 70,000
      6th – bought stationery in cash sh 2000
      10th – paid wangeci a creditor sh 65800 by cheque after deducting 6% cash discount. 13th paid salary in cash sh 4500
      18th – a debtor mark, settled his debt of sh 80,000 by cheque less 10% cash discount. 23rd – with drew sh 20,000 from bank for official use.
      25th – made cash purchases of shs 10,000
      28th – withrew sh 18,000 from bank for hospital bill. 30th – deposited cash 20,000 into his bank account.
      Prepare a three column cash book . (10mks)
3.    
   1. Explain five internal economies of scale a firm enjoys by expanding its operations. . (10mks)
   2. Outline five implications of a youthful population. (10mks)
4.      
   1. Explain five benefits of division of labour to an organization. (10mks)
   2. Explain five steps followed in making insurance claim . (10mks)
5.      
   1. Explain five public utilities provided by a county government . (10mks)
   2. The balances below were extracted from the books of Kanjoni traders on 14th June - 2020
      Motor van 320,000
      Stock 180,000
      Cash 20,000
      Bank 104,000
      Capital 544,000
      Creditors 80,000
      During the first week of June 2020, the following transactions took place
      June 2- Kanjori: traders introduced additional funds in the bank account shs 76,000. 3rd – purchased a motor van from cmc motors worth 400.000 on credit
      5th – paid creditors shs 12,000 cash
      6th- sold goods on credit to Anita shs 50,000.
      7th – Bought office equipment shs 10,000 by cheque.
      Prepare the balance sheet as at 7th June. (10mks)
6.    
   1. Explain five barriers to effective communication in an organization. (10mks)
   2. The following trail balance relates to Litein general stores for the year ending 31st Dec 2013.
                                           Dr                          Cr
      Rent expanses           46000
      General expenses     120,000
      Telephone expenses  48,000
      Purchases /sales       2,60 0,000          4,000,000
      Salaries                      360,000
      Discount                                                36,000
      Returns                      40,000
      Motor vehicle            500,000
      Debtors                     300,000
      Land                        2,000,000
      Cash                            12,000
      Capital                                                  1950,000
      Drawings                   80,000 
      Creditors                                               240,000
      Additional information
      Stock as at 31st Dec 2015 was 100,000
      Prepare
      
      1. Trading, profit & loss a/c (6mks)
      2. Calculate:
         
         1. Margin
         2. Current rate
         3. Return on capital (4mks)

MARKING SCHEME

1.      
   1. Explain five features of a perfect market structure . (10mks)
      1. Large number of buyers and sellers–hence no single buyer or seller can influence the market.
      2. Homogeneity of product-identical in all aspects.
      3. Wider knowledge of market-such issues as quality and price is known to everyone.
      4. Freedom of entry or exit-firms are free to join or leave the industry at will.
      5. Perfect mobility of factors production
   2. Explain five factors a firm will consider in choosing a method of product promotion.(10mks)
      ✓ Cost of medium should be affordable.
      ✓ Size of the area converted-large area require methods like radio or TV which has wider coverage.
      ✓ Target group-appropriate method that gets to the particular group e.g internet –youth.
      ✓ Government policy. May discourage or encourage other methods.
      ✓ Nature of product-some may demonstration hence personal selling etc.
2. Explain five differences between
   
   1. public corporation and public limited company. (10mks)
      

      Public corporation	Public limited company.
      (i) Formed through Act of parliament (ii) No minimal membership (iii) Owned by government (iv) BOD appointed by government (v) Profit goes to government (vi) Publish their financial statements .	i) Formed through company act ii) Minimum membership of ....... iii) Owned by shareholders (public) iv)BOD elected by shareholders during AGM v) Profit shared as dividend

   2. On 1st August 2014, Jadelo traders had shs 20,000 cash and a bank overdraft of shs 30,000.
      During the month, the following transaction took place
      2nd additional investment of sh 50,000 cash into the business banked immediately 3rd – cash sales amounting to sh 70,000
      6th bought stationery in cash sh 2000
      10th – Paid wangeci a creditor sh 65800 by cheque after deducting 6% cash discount.
      13th – paid salary in cash sh 4500
      18th – a debtor mark, settled hs debt of sh 80,000 by cheque less 10% cash discount.
      23rd – with drew sh 20,00 from bank for official use. 25th – made cash purcaheses of sh 10,000
      28th – withdrew sh 18,000 from bank for hospital bill. 30th – deposited cash 20,000 into his bank account.
      Prepare a three column cash book. (10mks)
      Dr                                                                                                            Cr
      

      Date	Details	Disc all	Cash	Bank	Date	Details	Dr	Cash	Bank
      2014 Aug 1 2 3 18 23 30 31	Bal b/d Capital Sales Mark Bank Cash Bal c/d	8,000 8,000	20,000 50,000 20,000	50,000 72,000 20,000 21,800	2012 Aug 1 6 10 13 23 25 28	Bal b/d Stationery Wange ci Salary Cash Purchases Drawings Bank Bal/d	4,200 4,200	20,000 4,500 1,000 20,000 44,600 90,000	30,000 65,800 20,000 18,000 133,800

3.    
   1. Explain five internal economies of scale a firm enjoys by expanding its operations. (10mks)
      1. Marketing economies-Low cost per unit in transport due to huge discounts.
      2. Financialeconomies–Wide to financial resource at Favourable rates.
      3. Risk bearing economies-due to diversification
      4. Manegerial economies–Efficiency due to qualified employees.
      5. Technical economies–Specialization of labour & machinery.
   2. Outline five implications of a youthful population. (10mks)
      ✓ Increased depending ratio as majority are unemployed
      ✓ Low labour supply as-not attained working use.
      ✓ More resources goes to providing needs of youth.
      ✓ Low savings by working population- hand to month
      ✓ May lead to low per capital income.
      ✓ Increase in crime unemployment.
4.    
   1. Explain five benefits of division of labour to an organization. (10mks)
      ✓ Less time is spent/saves time-less movement for one activity to another.
      ✓ Standardized goods/uniform-use of machines
      ✓ Increased output/quantity-worker are more adopted to work/specialists.
      ✓ Increased used of machines–increase quality/quantity,
      ✓ Improves efficiency–better use of resources.
   2. Explain five steps followed in making insurance claim. (10mks)
      ✓ Notifying the insurer reporting the loss with specified time.
      ✓ Filing the claim form-giving details of the loss.
      ✓ Investigation-to assess extent 4 truth of the loss
      ✓ Preparation of assessment report-If approved
      ✓ Payment of the claim/compensation then policy terminated.
5.    
   1. Explain five public utilities provided by a county government (10mks)
      ✓ Education services–setting up of learning institution specially ECD school.
      ✓ Transport facilities-; road & bus parking yards.
      ✓ Sewerage facilities-constructing shades where traders can operate from/ storage facilities.
   2. The balances below wee extracted from the books of Kanjoni traders on 1st June-2020
      Motor van 320,000
      Stock 180,000
      Cash 20,000
      Bank 104,000
      Capital 544,000
      Creditors 80,000
      During the first week of June 2020, the following transactions took place
      June 2- Kanjori: traders introduced additional funds in the bank account shs 76,000 3rd – purchase a motor van from cmc motors worth 400.000 on credit.
      5th – paid creditors shs 12,000 cash
      6th sold goods on credit to Anita shs 50,000.
      7th – Bought office equipment shs 100,000 by cheque Prepare the balance sheet as at 7th June. (10mks)
      Kanjori traders Balance sheet
      As at 7th June 2020
      

      Fixed assets     shs              shs Motor van    720,000 Equipment   100,000    820,000 Current assets Stock          130,000 Debtor         50,000 Bank           80,000 Cash             8000        268,000                                     1088000

      Shs           shs Capital                       620,000 Long term liabilities CMC motors              400,000 short term liab Creditors                      68000                                  1088000

      Litein general stores
      Trading , profit and loss a/c
      For the period ended 31st Dec 2013
      

      Shs Purchases 26000000 Less closing stock 100000 COS 2500000 Gross profit c/d 1460,000 3960,000 General expenses 120,000 Rent expenses 46,000 Telephone 48,000 Salaries 360,000 Net profit c/d 922,000 1496000

      Shs Sales 4,000,000 less returns 40,000 Net sales 3960,000 3960000 Gross profit b/d 1460,000 Discount rec 36,000 1496000 Net profit b/d 922000

      1. Margin =      GP     = 146,000 x 100% = 36.9%
                       Net sales    3960,000 (2mks)
      2. Current ratio  CA  =   582,000   = 2.2:1
                               CL       240,000     (2mks)
      3. Return on capital = Net profit x 100%
                                          Capital
         =  922000  x 100 = 47.3%
           1950,000 (2mks)