During 2018, a construction company that began operations in 2016 changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. Gross profit figures under both methods for the past three years appear below:

Completed-ContractPercentage-of-Completion2016

$547000$9880002017

70500010300002018

7800001130000$2032000$3148000

Assuming an income tax rate of 30% for all years, the effect of this accounting change on prior periods should be reported by a credit of

$536200 on the 2018 retained earnings statement.

$536200 on the 2018 income statement.

$791000 on the 2018 retained earnings statement.

$791000 on the 2018 income statement.