On January 1, 2021, Frost Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a $1,125,000 increase in the January 1, 2021 inventory. Assume that the income tax rate for all years is 20%. The cumulative effect of the accounting change should be reported by Frost in its 2021

		retained earnings statement as a $720,000 addition to the beginning balance.
		income statement as a $720,000 cumulative effect of accounting change.
		retained earnings statement as a $900,000 addition to the beginning balance.
		income statement as a $900,000 cumulative effect of accounting change.