"Is that bad?"
Translation:Ist das schlecht?
It is very unlikely that "böse" is the correct translation in this context. "böse" is referring to people with an evil nature, whereas "schlecht" describes things of bad quality or eligibility. In the sentence "Is THAT bad?" I assume an object, thing or circumstance is meant, but not a person.
Hope that helps :)
Edit: There is an additional meaning to "schlecht" - you can use it to describe a person. Then it basically has the meaning of "böse".
Is "es" in place of "das" not acceptable? My answer "Ist es schlecht?" got rejected.
"Es ist schlecht" is a statement, and in this exercise they are looking for a question - this would be "Ist es schlecht?"
It is the same in english: "It is bad" is a statement, whereas "Is it bad?" is the question.
Hope this helps.