Hiteck Electronics sells a diagnostic machine to a hospital with a four-year payment plan. The company would like to estimate the bad debt allowance needed to cover the notes outstanding over the next four years. Estimated lost cash flows and the probability of occurrence for each of the next four years are summarized in the following schedule. The risk-free rate is 8%.

What is the estimated bad debt allowance at December 31, 2022?

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Year 2023 2024 2025 2026 Projected Cash Flow Loss from Uncollected Notes $ 8,000 18,000 $10,000 22,000 45,000 $ 6,000 14,000 $26,000 35,000 Probability of Loss Occurring 90% 10% 15% 70% 15% 85% 15% 50% 50%