Adventure Company uses the aging of accounts receivable method to estimate Bad Debt Expense. The balance of each account receivable is aged on the basis of three categories as follows: (1) 1-30 days old, (2) 30-90 days old, and (3) more than 90 days old. Based on experience, management has estimated what portion of receivables of a specific age will not be paid as follows: (1) 2%, (2) 13%, and (3) 37%, respectively. At December 31, 2016, the unadjusted credit balance in the Allowance for Doubtful Accounts was $200. The total Accounts Receivable in each age category were: (1) 1-30 days old, $72,000, (2) 30-90 days old, $16,000, and (3) more than 90 days old, $3,000.

Required:
a.	Calculate the estimate of uncollectible accounts at December 31, 2016.

b.

Prepare the appropriate adjusting entry dated December 31, 2016. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Record the adjusting entry on December 31, 2016.

Nutty Productions Inc. generated service revenue of $62,000 and income from operations of $26,000. The company estimates that, had it extended credit it would have instead generated $108,000 of service revenue, but it would have incurred $41,000 of additional expenses for wages and bad debts.

1-a.	Using these estimates, calculate the amount by which Income from Operations would increase (decrease).

1-b.	Should the company extend credit?

	Yes
	No