Assume that on March 1, 2019, a firm prepays rent for a year. The amount of the prepayment is $1,200. If the firm prepares financial statements at the end of the year (December 31, 2019), the effect of the adjusting entry on the accounting equation is

Choose one of answer choices

Increase an asset by $1,200; Decrease stockholders' equity by $1,200

Decrease an asset by $1,000; Decrease stockholders' equity by $1,000

Increase an asset by $1,000; Increase stockholders' equity by $1,000

Decrease an asset by $1,200; Decrease stockholders' equity by $1,200