On January 1, 2011, Poe Construction, Inc. changed to the percentage-of-completion method of income recognition for financial statement reporting but not for income tax reporting.

Poe can justify this change in accounting principle.

As of December 31, 2010, Poe compiled data showing that income under the completed-contract method aggregated

$700,000. If the percentage-of-completion method had been used, the accumulated income through December 31, 2010, would have been $880,000. Assuming an income tax rate of 40% for all years, the cumulative effect of this accounting change should be reported by Poe as

a. An increase in construction-in-progress for

$180,000 in the 2010 balance sheet.

b. A decrease in the beginning balance of retained earnings for $108,000 in 2011.

c. A cumulative effect adjustment of $108,000 on the 2011 income statement.

d. An increase in ending retained earnings of

$180,000 in 2010.