Cycle Wholesaling sold merchandise on account, with terms n/60, to Sarahs Cycles on February 1 for $550 (cost of goods sold of $380). On February 9, Sarahs Cycles returned to Cycle Wholesaling one-quarter of the merchandise from February 1 (cost of goods returned was $95). Cycle Wholesaling uses a perpetual inventory system, and it allows returns only within 15 days of the initial sale.

Required:

1. Prepare the journal entries to record the sale on February 1, goods returned on February 9, and cash collected on March 2.

Journal entry worksheet

1- 2/1Record the sales on account of $550 with terms n/60.

2- 2/1 Record the cost of goods sold of $380.

3- 2/9 Record the sales returned of $138.

4- 2/9 Record the cost of the sales returned of $95.

5- 3/2 Record receipt of payment for sales on account

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