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Assignment 4 ( C h 4 ) Question 3 of 7 - 1 Derby Transportation Inc. designs and builds trains for rail networks across Canada.
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Derby Transportation Inc. designs and builds trains for rail networks across Canada. The company, which is publicly traded, has an October year end. On March Derby Transportation signed a contract with OM Corridor Corp. to design and build highspeed trains, with each train consisting of seven passenger cars. The highspeed train will operate between Ottawa and Montreal. The following events took place in in relation to the contract:
March : At the signing ceremony, officials from Derby and OM sign a contract, which is for $ Derby is to design, manufacture, and deliver the trains to OM's train yards in Montreal. Derby's management estimates that the design component of the contract would be valued at $ if contracted for separately, while the manufacturing of the ten trains would be valued at a total $ if they were purchased separately. Derby agreed to provide a twoyear assurancetype warranty for the trains, and the company's management estimates that the warranty claims would total $ based on experience. OM agrees to pay a $ deposit within days of signing the contract and to pay the balance within days of the trains receiving final approval and certification from the Transportation Safety Board.
March : OM pays the deposit specified in the contract.
May : Derby's engineering staff complete the train design and it is approved by officials from as well as the Transportation Safety Board.
August : Derby completes construction of the trains.
September : The trains are delivered according to the contract to OM's Montreal train yards.
September : After testing for safety compliance, the trains receive final approval from OM and the Transportation Safety Board and are certified to carry passengers.
November : OM pays the balance owing on the contract.
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