In 2019, Swan Company discovered that it had for the past 10 years capitalized as a production cost certain expenses that are properly classified as administrative expenses. The total amount of the expense for 2018 was $300,000, $60,000 of the item was included in the ending inventory that year and $240,000 was deducted as cost of goods sold.

a.The company should change its accounting method in 2019, with a $60,000 negative 481 adjustment which decreases its 2019 taxable income.

b.The company should change its accounting method in 2019 and recognize a $60,000 negative 481 adjustment that will be spread equally over 2019-2022.

c.The company should amend its 2018 tax return and reduce its income by $240,000.

d.The company should change its accounting method in 2019, and increase its 2019 income by $60,000, the amount of the positive 481 adjustment to income.

e.None of these choices are correct.