Final answer:
The sales transaction of Spicy Maya Hot Chocolate impacts the accounting equation by decreasing inventory and increasing COGS as an expense. Concurrently, the asset side increases due to cash received or receivable, and the owner's equity reflects the net effect after considering revenue and expenses from the sale.
Step-by-step explanation:
The question pertains to how inventory transfer and the expenses from a sale affect the accounting equation. When Cardullo's sells the Spicy Maya Hot Chocolate, which was purchased for $8 from their supplier, two main things happen in the accounting books.
Inventory Transfer and Expense Recognition
Firstly, there's a decrease in inventory and an increase in the cost of goods sold (COGS), an expense. When the product is sold, the inventory asset decreases by the cost of the item ($8), while COGS, an expense on the income statement, increases by the same amount. This reflects the outflow of the product from the business to the customer.
Accounting Equation Impact
Secondly, assuming the sale is for cash, the cash or accounts receivable on the asset side increases. The accounting equation which is Assets = Liabilities + Owner’s Equity is impacted as follows:
The assets increase due to the receipt of cash or the recognition of an account receivable.
Owner's equity is impacted positively by the revenue from the sale, but negatively by the increase in expenses (COGS).
Overall, the side of the equation that captures the company's profitability, namely the Owner’s Equity, reflects the net effect of the transaction after considering the revenue and the associated COGS.