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Question - Cycle Wholesaling sold merchandise on account, with terms n/60, to Sarah's Cycles on February 1 for $1,000 (cost of goods sold of $600). On February 9, Sarah's Cycles returned to Cycle Wholesaling one-quarter of the merchandise from February 1 (cost of goods returned was $150). Cycle Wholesaling uses a perpetual inventory system, and it allows returns only within 15 days of 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.
2. Calculate the gross profit percentage for the sale to Sarah's Cycles.
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