L. Investment by owners. Suppose five radiologists decide to open a diag nostic center that they incorporate as an investor-owned business called Bayshore Radiology Center. They each invest $200,000 cash in the business in exchange for $200,000 of common stock. The transaction results in an equal increase in both assets and equity. In this case, there is an increase in the cash account of $1,000,000 and an increase in the common stock account of $1,000,000. After the transaction, the balance sheet looks like this: $1,000,000 $1,000,000 $1,000,000 Cash Total assets $1,000,000 Common stock Total claim 2. Purchase of equipment for cash. To support operations, the business needs diagnostic equipment. Assume that the first piece of equipment purchased costs $200,000, and it is paid for in cash. This transaction results in a change in the composition of the business's assets, but the totals are unaffected: $ 800,000 Common stock Cash Gross fixed assets 200,000 Total assets $1,000,000 $1,000,000 $1,000,000 Total assets and total claims still amount to $1,000,000 because no Total claims new capital was acquired by the business. 3. Purchase of supplies on credit. Assume that Bayshore purchases medical supplies for $20,000. The supplier's terms give the center 60 days to pay the bill. Assets are increased by this transaction because of the expected benefit of using these supplies to provide services. Also, liabilities (accounts payable) are increased by the amount due the supplier: s 800,000 Accounts payable 20,000 1,000,000 Cash Supplies Gross fixed assets 200,000 Total assets $1,020,000 20,000 Common stock Total claims $1,020,000