Rule: Only sinking fund accounts (or the portion thereof) that are considered to offset current bond liabilities can be included within current assets. Choice "D" is correct. The entire balance in the sinking fund account (deposits plus interest earned) in this example is shown as a noncurrent asset since all of the bonds mature in Year 10. The bond liability is not current, and the interest earned is also included in the sinking fund, a noncurrent asset.
Choices "a" and "c" are incorrect. The asset is not current since the related liability and offsetting interest earned is not current.
Choice "b" is incorrect. The interest earned is also part of the sinking fund available to retire the bonds, and is noncurrent.