Yes, you have to solve both. This image makes it easier to visualize the flow of stresses. And yes, it is an image for block shear, but remember, block shear is shear +tension (Ref J4-5)
Back to your subject matter, J4-1 is for tensile yielding and J4-2 is for tensile rupture. Ae has been defined in section D3 and note, Ae is not limited to steel members with holes, bolted connections.