Is dialogue A problematic, because "that " is used instead of "it"?

Or does it sound natural because "that" is just more emphatic than "it"?

Dialogue A

A: What's that? Is that a ball?

B: No, that's not a ball. That's a white kitten.


Dialogue B

A:What's that? Is it a ball?

B: No, it's not a ball. It's a white kitten.



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