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Question: You have been engaged to do the

You have been engaged to do the accounting for the termination and liquidation of the Miller, Smith, and Tavares partnership. Miller has requested an immediate distribution of cash from the partnership that is being questioned by the other partners. Although Miller currently has a positive balance in his capital account, Smith and Tavares are concerned that this might change as the liquidation process unfolds. They argue that Miller should wait before receiving a cash distribution. All of the partners would like you to explain how it is possible that they might develop a deficit in their capital account during the liquidation process.
Write a memorandum to Miller, Smith, and Tavares explaining how a positive capital account balance could develop into a deficit balance during the partnership liquidation process.


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