D is corrent. Interest earned on board-designated investments is reported as unrestricted revenue. When the governing board of a not-for-profit organization places designations on assets, they are designating the use of unrestricted net assets. Therefore, income earned on board-designated investments represents an increase in unrestricted net assets. Unconditional promises to give are reported in the period the pledges are made, not in the period of cash collection. However, since the contributions will not be received until year 2, the contributions should be reported as an increase in temporarily restricted net assets on the statement of activities for year 1 because of this time restriction.
A is incorrect because the interest is unrestricted.
B is incorrect because the pledges will not be received until year 2.
C is incorrect because the pledges will not be received until year 2.
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