B is corrent. Estimating bad debts based on credit sales of the period is the income statement approach in that bad debts are treated as a function of sales.
A is incorrect because estimating bad debts on the basis of accounts receivable focuses on the balance sheet by treating bad debts as a function of the age of, or balance in, accounts receivable at year-end.
C is incorrect because it is not a method which estimates bad debts but rather an alternative to the estimation methods. Under the direct write-off method, bad debts are considered an expense in the period in which they are written off. This method is not in accordance with GAAP.
D is incorrect because estimating bad debts on the basis of accounts receivable focuses on the balance sheet by treating bad debts as a function of the age of or balance in accounts receivable at year-end.
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