Early in 2014, Jones Industries was formed with authorization to issue 125,000 shares of $20 par value common stock and 15,000 shares of $100 par value cumulative preferred stock. During 2014, all the preferred stock was issued at par, and 90,000 shares of common stock were sold for $35 per share. The preferred stock is entitled to a dividend equal to 5 percent of its par value before any dividends are paid on the common stock.

During its first five years of business (2014 through 2018), the company earned income totaling $3,850,000 and paid dividends of 55 cents per share each year on the common stock outstanding.

On January 2, 2016, the company purchased 2,000 shares of its own common stock in the open market for $80,000. On January 2, 2018, it reissued 1,200 shares of this treasury stock for $60,000. The remaining 800 shares were still held in treasury at December 31, 2018.

1. Distinguish between paid-in capital and retained earnings of a corporation. Why is such a distinction useful?
   1. What are the major transactions and other financial activities that impact the amount of paid-in capital of a corporation?
   2. Identify for each major type of transaction or activity whether it increasesor decreasesthe amount of paid-in-capital.