Rush Company has 1000 shares of stock outstanding. Its paid-in-capital is $700,000 and its E&P is $600,000. It distributed $80,000 to August in return for his 100 shares in a redemption that qualified as a complete termination of August's interest. What is the effect on Rush Company's capital structure?

a.E&P is reduced by $80,000

b.E&P is reduced by $60,000 and paid-in-capital is reduced by $20,000

c.E&P is reduced by $10,000 and paid-in-capital is reduced by $70,000

d.Paid-in-capital is reduced by $80,000