Baden Company purchased machinery with a list price of $32,000. They were given a 10% discount by the manufacturer. They paid $200 for shipping and sales tax of $1,500. Baden estimates that the machinery will have a useful life of 10 years and a residual

The answer is d. Bad debts expense is an operating expense. This is because it represents an expense incurred during the normal course of business operations, specifically the cost of extending credit to customers who do not pay their bills. It is not part of cost of goods sold since it does not relate to the direct cost of producing or purchasing goods. It is also not a contra revenue account, as it does not reduce revenue directly but rather represents a separate expense item.