During 20x1, Mike's Company changed its accounting principal with respent to recognizing warranty expense. At January 1, 20x1, the unrecorded liability for warranties was $2.2 million. Ludwig's tax rate is 25%. As a result of this change, the firm would:

Report a prior period adjustment decreasing retained earnings by $1,650,000.Report a prior period adjustment decreasing retained earnings by $550,000.Report a current period charge decreasing net income by $550,000.Report a current period charge decreasing net income by $1,650,000.