A company switched from the cash basis to the accrual basis for recognizing warranty expenses. The unrecorded liability for warranties was $2.1 million at the beginning of the year. Its tax rate is 35%. The company booked a year-end warranty liability of $3 million. As a result of this change, the firm would:
(a) Report a current period charge decreasing net income by $735,000.
(b) Report a prior period adjustment decreasing retained earnings by $735,000.
(c) Report a current period charge decreasing net income by $1,365,000.
(d) Report a prior period adjustment decreasing retained earnings by $1,365,000.