Question: On december 31, 2015, 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, 2016, after recording the interest earned, Leslie decided to reclassify the Kaufmann Bonds to its available-for-sale catrgory in anticipation of a major restructuring. At that time, the ending quoted market price for teh bonds was $105,000.
Required: Prepare the journal entries on December 31, 2016, to record the interest earned and the reclassification.