Final answer:
Toastbusters Corp., being an S corporation, can adopt various tax accounting methods including cash and accrual methods for general accounting, as well as both LIFO and FIFO for inventory accounting purposes. The choice may depend on factors like the size of the business and preferred financial reporting method.
Step-by-step explanation:
Toastbusters Corp., a calendar year-end S corporation, generates 80% of its income from the sale of toasters. The tax accounting methods that would be permitted for Toastbusters can include several options depending on certain conditions related to their revenue and inventory practices. For the vast majority of S corporations, both the cash method and accrual method are generally allowed. The cash method is typically used by small businesses because it is simpler and is based on cash flow. The accrual method can provide a more accurate picture of financial health for larger companies. In regards to inventory methods, both LIFO (Last In, First Out) and FIFO (First In, First Out) could potentially be used, depending on how the company prefers to account for their cost of goods sold. Generally, FIFO is considered to be the default method, but if the company chooses LIFO, there are IRS requirements they must follow, including consistency in application and proper notification to the IRS.