Transactions of Kent Corporation are as follows:

1. The Company is granted a charter that authorizes the issuance of 150 000 preferred shares and an unlimited number of common shares

2. The founders of the corporation are issued 10 000 common shares for land valued by the board of directors at $210 000 (based on independent valuation)

3. Sold 15 200 preferred shares for cash at $110 per share

4. Repurchased and cancelled 3 000 shares of outstanding preferred shares for cash at $100 per share

5. Paid $85 000 in dividends that were declared in the previous period

6. Repurchased for cash and cancelled 500 shares of the outstanding common shares issued in item 2 above at $49 per share

7. Issues 2 000 preferred shares at $99 per share

Why is the distinction between paid-in capital and retained earnings important?