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\mathrm{.}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.