Cycle Wholesaling sold merchandise on account, with terms n/60, to Sarahs Cycles on February 1 for $850 (cost of goods sold of $525). On February 9, Sarahs Cycles returned to Cycle Wholesaling one-quarter of the merchandise from February 1 (cost of goods returned was $135). Cycle Wholesaling uses a perpetual inventory system, and it allows returns only within 15 days of initial sale.

Required:

1. to 3. Prepare the journal entry to record the sales, Goods returned on February 9 and Cash collected on March 2.

4. Calculate the gross profit percentage for the sale to Sarahs Cycles.