Superpants, Inc. redeemed 30 percent of its stock, 300 shares of $1 par value common stock for $7,000, meeting the requirements for sale or exchange treatment. As a result of the $7,000 cash distribution: O E&P is reduced by $7,000, less $300 of par value, the latter reducing the capital stock account. The capital stock account is reduced by $300 and the paid-in capital account by 30 percent of its balance, while the remainder reduces E&P. O E&P is reduced by $7,000, the amount of the distribution. O The capital accounts are reduced by $7,000, less 30 percent of the E&P account.