On December 31, 2018, Leslie Company held an investment in bonds of Kaufmann Company which it categorized as being held to maturity. At that time, the 11%, $100,000 face value bonds had a carrying value of $106,144.54 and were being amortized using the effective interest method based on a market rate of 10%. Interest on these bonds is paid annually each December 31.

On December 31, 2019, 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, 2019, to record the interest earned and the reclassification.

CHART OF ACCOUNTS

Leslie Company

General Ledger

	ASSETS
111	Cash
114	Investment in Available-for-Sale Securities
119	Allowance for Change in Fair Value of Investment
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
189	Accumulated Depreciation
191	Investment in Held-to-Maturity Debt Securities

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue
431	Interest Income

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense
912	Unrealized Holding Gain/Loss: Available-for-Sale Securities