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A Co purchases a debt instrument on the 1st of January 2016, for its fair value of 1,000, which is due to mature on

A Co purchases a debt instrument on the 1st of January 2016, for its fair value of 1,000, which is due to mature on the 31st of December 2020. The instrument has a principal amount of 1,250 and carried interest at a rate of 4% per annum, paid annually. The effective interest rate is 9%. How should A Co account for the debt instrument over its whole five-year term?

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