The bookkeeper for Phillips, Inc. mistakenly recorded a $300,000 three-year trade note receivable as long-term note receivable in 2015. Interest revenue was correctly recorded. The error was discovered in 2017 by the company's auditors. What is the proper way to correct the error?

Ignore the error because it is not material in amount.

Correct the classification in 2017 retrospectively for comparative balance sheets.

Use a footnote disclosure only because it does not change working capital.

Correct the classification and adjust retained earnings for 2015 and 2016.