Characteristic equation of D FF is , $Q(t+1)=D$
So, $P^+ = R, \;\;Q^+=\overline{P+R},\;\;\text{and}\;R^+=Q.R'$
Sequence of states will be as:
${\begin{array}{|c|c|}\hline
\textbf{Clock Pulse}& \textbf{PQR} \\\hline
\text{Initially}&000 \\\hline 1&010 \\ \hline 2&011 \\ \hline 3&100 \\ \hline 4&000 \\ \hline
\end{array}}$
$4$ is the number of distinct states.
Correct Answer: $B$