In the year 2 retained earnings statement as an $800,000 credit adjustment to the beginning balance. In the year 1 retained earnings statement as an $800,000 debit adjustment to the beginning balance. As an adjustment to the balances of inventory, and a retrospective application to cost of goods sold, net income, and retained earnings in the year 1 comparative financial statements. In the year 2 income statement as an $800,000 loss from cumulative effect of change in accounting principle.