Suppose Company A is quite similar to Company B in most respects-same size, same industry-but Company A uses the allowance method for bad debts and Company B does not. Which company do you believe has the higher quality of earnings and why?

The allowance method for bad debts is used by a firm in order to __________ (estimate debts that have been deemed uncollectible / write off debts to bad debt expense once certain to be collected). As this method assumes that _________ (all credit accounts will be received as income until proven otherwise / some credit accounts will not be received as income), it provides ________ (a conservative / an aggressive) estimate of a firm's earnings. Due to this method, Company ____ (A / B), which _______(uses / does not use) this method, will likely have a higher quality of earnings.

Choose the correct answer of the two in (parenthesis). Thank you.