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On December 31, Year 1, Leslie Company held an investment in bonds of Kaufmann Company...

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Accounting

On December 31, Year 1, Leslie Company held an investment in bonds of Kaufmann Company which it categorized as being held to maturity. At that time, the 8%, $100,000 face value bonds had a carrying value of $107,023.56 and were being amortized using the effective interest method based on a market rate of 7%. Interest on these bonds is paid annually each December 31.
On December 31, Year 2, after recording the interest earned, Leslie decided to reclassify the Kaufmann bonds to its available-for-sale category in anticipation of a major restructuring. At that time, the ending quoted market price for the bonds was $102,000.
Required:
Prepare the journal entries on December 31, Year 2, to record the interest earned and the reclassification.

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