Rush Company, Inc. 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 Augusta in return for her 100 shares in a redemption that qualified as a complete termination of Augusta'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.