A firm has a beginning balance (credit) in the allowance for doubtful accounts of $1,200. At year-end, the firm has a balance of $20,000 in accounts receivable, of which they now estimate $2,000 will not be collected. The adjusting entry for the allowance for doubtful accounts:

Reduces net income by $800

Reduces net income by $3,200

Does not affect net income

Reduces net income by $1,200

Reduces net income $2,000