On July $1,20$X$8,$ your calendar year company prepays $$12,000$ for $3$ years' rent and records the amount as an asset. At year end, you discover that the adjusting entry debits Rent Expense and credits Prepaid Rent for $$1,000.$ Without a correcting entry:

assets will be overstated

net income will be understated

liabilities will be understated

none of the above