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Yes. All episodes are considered canon unless stated otherwise.

However in a brief interview with David OReilly, who wrote and animated the episode, found here, he states that Pen "really wanted me to do my own thing" and that when it came to storyboarding and making the episode, Pen wanted him to "to do all that stuff myself." So, in a way, the episode does not follow the same plotline as the rest of the series because the Adventure Time staff had no part in writing or making it.

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