Business Studies Paper 2 Questions and Answers - Lanjet Mock Exams 2021/2022

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INSTRUCTIONS TO CANDIDATES

  • This paper consists of six questions.
  • Answer any five questions.
  • All questions carry equal marks.
  1.  
    1. Explain any five measures a country may adopt to increase its volume of exports. (10 marks)
    2. Explain five factors that encourage entrepreneurial development in Kenya. (10marks)
  2.  
    1. Dr Korir a surgeon opened up a clinic in his rural home of Chepalungu. The business closed after six months. Explain five reasons for the business failure.
    2. Uhuru Highway Ltd started business on 1st May 2018 with Shs. 250,000 consisting of:
      Cash at bank Shs.200,000,
      Cash in Hand Shs. 30,000
      Furniture Shs. 20,000

      The following transactions took place during the month of May.
      3rd May 2014, Motor Van worth Shs. 85,000 and stock of Shs. 25,000 were bought on credit
      6th May 2014, more stock worth shs.10,000 was bought by cash
      9th May 2014, withdrew money from bank sh 50,000 for office use
      15th May 2014, Sold stock at cost to a customer on credit for shs. 18,500
      19th May 2014, received a cheque for the full settlement of a debt owed from the transaction of 15th may 2014
      23rd May 2014, paid Shs. 65,000 by cheque for the motor van bought earlier on credit
      31st May 2014, paid Shs. 20,000 cash for the stock bought on credit
      Required:
      Prepare the balance sheet of Uhuru Highway Ltd as at 31st May 2019. (10marks)
  3.  
    1. Explain five measures that Kenya Government should adopt to solve the widespread cases of unemployment. (10mks)
    2. Give four differences between a private limited company and a public corporation.(10mks)
  4.  
    1. Explain FIVE Money transfer facilities provided by Commercial Banks (10 s)
    2. On 1st May 2010 Musa Traders had sh. 15, 000 cash in hand and Sh. 160, 450 at bank. During the month, the following transactions took place.
      May 2    Bought goods for Sh. 5, 400 and paid by cheque.
      May 8    Received sh. 7, 200 cash from a debtor
      May 15  Paid a creditor Sh. 18, 300 by cheque
      May 16  Paid salaries sh 4, 200 in cash
      May 18  Sold goods for sh. 9, 200 and was paid by cheque
      May 20  Withdrew sh. 30, 000 from bank for office use
      May 25  Received sh.8, 000 cash from a debtor
      May 28  Paid general expenses sh. 4, 000 cash.
      May 29  Deposited sh.10, 000 cash in bank
      May 30  Paid for electricity sh. 2, 500 by cheque
      Record the above transactions in a two column cash book and balance it off. (10 Marks)
  5.  
    1. Outline FIVE causes of Balance of payments disequilibrium (10 mks)
    2. Describe FIVE channels of distribution that may be followed by imported manufactured goods (10 mks)
  6.  
    1. Explain five functions of the stock exchange market. (10mks)
    2. VP Shah shop sells all its goods at a margin of 20%. For the year ended 30th April 2006, the trading activities were as follows.
      Purchases sh. 80,000
      Sales sh. 950,000
      Net profit 5% of sales
      Closing stock sh. 200,000
      Calculate
      1. The gross profit
      2. The opening stock
      3. Mark up percentage
      4. The net profit.


MARKING SCHEME

  1.  
    1. Measures a country may adopt to increase its volume of export
      1. Engaging in international trade fair/exhibition to promote the home products
      2. Devaluation of its own currency to make export cheap
      3. Lowering taxes on exports to make them cheap
      4. By diversifying on its exports to increase the market.
      5. Offering subsidies to firms that are involved in production of export goods
      6. Reducing the length /procedure for acquiring licenses for exporting products
      7. Adopting modern technology to export products to make them fashionable/High quality/more attractive to customers
      8. Offering customs drawbacks – The government refunds either in full or part of custom duty paid on imported raw materials if finished product is exported.
      9. Lobbying/Negotiate with trading partners for removal of trade restrictions placed on the country’s exports
        (Any 5 well explained x2=10marks)
    2. Factors that encourage entrepreneurial development in Kenya
      1. Improved infrastructure; good roads, adequate security, availability of water, electricitywill encourage entrepreneurial development.
      2. Favorable government policies such as lessening tax burden by providing tax holidays, providing incentives and simplifying procedures and cost of obtaining relevant legal documents required
      3. Availability of market for goods and services/Expanding market due to devolution of services
      4. Increased accessibility to education and training/Expanded capacity to provide training for better skills to entrepreneurs.
      5. Availability of resources/Increased accessibility to credit from commercial financial institutions and also from the government through government initiated projects like uwezo fund and women enterprise funds.
      6. Political stability/absence of political chaos/No inter-clan fighting creates a conducive environment for entrepreneurs to venture into varied investments with confidence.
      7. Favorable natural conditions/enough rainfall for agro-based businesses.
        (Any 5 well explained x2=10marks)
  2.  
    1. A surgeon set up a clinic in a distant rural centre. The business was closed after six months.
      Identify four possible causes for the failure
      • Inadequate capital
      • Poor working strategies
      • Unfavorable government policies
      • Insecurity in the area
      • Inadequate academic and technical knowledge
      • Inadequate business management knowledge
      • Inadequate demand market
      • Poor record keeping
      • Poor customer relations
      • Large drawings from firm
      • Lack of self discipline and poor moral character
      • Poor planning
      • Changes in technology
      • Changes in business environment
    2.                                                 Uhuru Highway
                                                      Balance Sheet
                                                    As at 31st May 2014
                                                                  Ksh.
          Fixed Assets:
      Equipment                                      24,000
      Furniture                                           6,000
                                                             30,000
      Current Assets:
      Stock                      49,980
      Debtors                  45,770
      Bank                       38,760
      Cash                       1,200             135,710
                                                           165,710 
                                                        Ksh.

      Capital                                 128,440
      Add Net profit                        27,320
      Less Drawings                      20,500
                                                  135,260
      Short term Liabilities:
      Creditors                               30,450

       

                                               
                                                165,710

      10 ticks @ 1mk= 10mks
  3.  
    1. Measures used to solve unemployment cases in Africa.
      • Encouraging investment by Private sectors through offering subsidies to increase employment opportunities.
      • Use policies that encourage use of labour intensive methods of production.
      • Ensure political stability – attract foreign investment into the country.
      • Delocalise firms to prevent / reduce urban unemployment brought about by rural-urban migration.
      • Encourage use of family planning methods to reduce rapid population growth.
      • Provide appropriate education and training methods that equips citizens with relevant skills and knowledge required by firms.
      • Increases in Government expenditure to create job employment
      • Encourage use of local resources to create employment     (5 x 2 = 10mks)
    2. Give five differences between a private limited company and a public corporation.
       Public corporation   Private limited company 
       It is formed by an act of parliament   It is formed under the company’s act 
       It is not profit – motivated provides services to the general public   It is profit motivated
       It is financed by the government  Capital is raised through the sale of share
       Board of directors is appointed by the government  Directors are elected by shareholders
       Losses are subsidized/ borne by the government  Losses may lead to collapse of business
       It is owned by the government  It is owned by shareholders
  4.  
    1. Money transfer facilities provided by the Commercial Banks
      • Standing order- Instruction to the bank by the A/C holder to make regular payment to the A/c holder to make regular payment to a name client for an agreed period of time.
      • Credit transfer – Method of paying many people using one cheque
      • Telegraphic transfer – Method of remitting money fast and safely from one person to another
      • Electronic Funds transfer (EFT) – Transferring money from one account to another using computers
      • Cheques- Written order by the drawer to the Bank to pay on demand a specified amount of money to the named person on the cheque.
      • Banker’scheque – Written order by a bank to another to pay a stated amount of money to the payee.
    2. Two column cash-book
      DR                                                         MUSA TRADERS                                                           CR
       Date   Details   Folio   Cash   Bank   Date   Details   Folio   Cash   Bank 
       2010
       May 1 
               8
              18
              20 
              25
              29



      Bal b/d√1
      Debtor√½
      Sales√½
      Bank√½
      Debtor√½
      Cash√½





        C

        C



        Sh.
       15,000 
         7,200
       
       30,000
         8,000

                    
        60,200
        42,000
        Sh.
       160,450 

           9,200


        10,000
                    
       179,650 ✓1
       123,450 ✓1 
       2010
      May 2 
              15 
              16
              20
              29
              30
              31


      Purchases√½
      Creditor√½
      Salaries√½
      Cash√½
      Gen.exp.√½
      Bank√½
      Electricity√½
      Bal c/d√1




        C


        C

        Sh.


        4,200 

        4,000
       10,000 

        42,000 
        60,200
        Sh.
        5,400 
       18,300 

       30,000


        2,500
       123,450 
       179,650
  5.  
    1. Causes of B.O.P disequilibrium
      • Fill in volume of exports
      • Deterioration in the country’s terms of trade
      • Increase in volume of imports
      • Restrictions by Trading partners
      • less capital inflow compared to outflow
      • Over-valuation of domestic currency
      • Devaluation of currency by a Trading partner
        Mention 1mark otherwise 2x10 = 10 marks
    2. Channels of distribution of imported manufactured goods.
      • Foreign Manufacturer → Agents → Wholesaler → Retailer → Local Consumer.
      • Foreign Manufacturer → Wholesaler → Retailer → Local Consumer.
      • Foreign Manufacturer → Local Consumer.
      • Foreign Manufacturer → Manufacturer’s Representative → Wholesaler → Retailer → Local Consumer.
      • Foreign Manufacturer → Wholesaler → Local Consumer.
      • Foreign Manufacturer → Retailer → Local Consumer.
        NB. Candidate should mention Foreign Manufacturer and Local Consumer
        5 x 2= 10mks
  6.  
    1. Functions of the stock-exchange market.
      • It assists investors to buy shares by providing appropriate information to them.
      • It assists shareholders who want to dispose of shares by giving them relevant information.
      • It assists companies that need to raise money by floating shares to the public.
      • It compiles business information that would be used by interested parties to make decisions on the investment.
      • It vets the standard of performance of Company that intends to be quoted in the stock market.
      • It sets the prices of shares for the general public investors.
      • It list / delists companies that are viable / not viable.
      • Generates revenue for the government through taxation.
      • Creation of employment.
        (5 x 2 = 10mks)
    2.  
      1. The gross profit
        Gross profit = sales – costs of sales – ½
        margins = G.P × 100
                        sales
        20% =    G.P    × 100
                   950000
        G.P = 190000 ½
      2. The opening stock
        C.O.S = O.S + purchase = C.S ½
        C. O. S = sales – G.P
        C.O.S = 950,000 – 190,000 ½
                  = 760,000
        O.S = 760,000 – 80,000 + 200,000
               = 680,000 + 200,000 = 880,000
        760,000 = opening stock + 600,000 ½
        760,000 – 600,000 = O.S ½
        160,000 = opening stock ½
      3. Mark up percentage
        Mark − up =   G.P   × 100
                            C.O.S
                         = 190000 × 100
                            760000
                          = 25%
      4. The net profit = 5% of sales
        N.P  = 5/100 × 950000 ½
              = 47,500   
                       (10x1)=10mks
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