Luce Bruce Company has recently started a business selling dormitory-sized refrigerators to students at many major colleges and universities. Students purchase the refrigerators for either $100 cash or $30 down and three installments of $30 due at the end of the next three months. Only about 25% of the sales are at the cash price with most students preferring to spread out the payments. Sally Rogers, the accountant for Luce Bruce, maintains that some accounts will turn out to be uncollectible and that an allowance for uncollectibles must be determined and Luce Bruce must recognize the accompanying bad debt expense although it has no experience with sales on accounts to students.

Prepare a brief analysis of the major issue or issues in short cases.

For each issue identified in case, clearly indicate an acceptable proposed solution.