Paul has extended $3,500 credit to one of his largest clients for the purchase of two fireproof filing cabinets. Paul paid $1,250 each for the filing cabinets. Since he has not extended credit in the past, he is uncertain how to record the transaction on the balance sheet and income statement. He is using the accrual method of accounting. What are the entries Paul will need to make on his financial statements?

A. Record $2,500 in sales; increase accounts receivable by $3,500; and record $1,000 in profit to balance the transactions.

B. When the client pays Paul, he should record $3,500 in sales, $2,500 in COGS, and $1,000 in profit.

C. Record $3,500 in sales; create an accounts receivable account and add $3,500 to it; decrease inventory by $2,500; increase COGS by $2,500.

D. Record $3,500 in sales; create an accounts receivable account and add $3,500 to it; decrease inventory by $3,500; increase COGS by $3,500.