In times of rising prices, inventory profits (or phantom profits) are said to occur under the FIFO cost flow assumption. This occurs because under FIFO, the release of (older/newer), (higher/lower) costs to the income statement results in (higher/lower) profits than if current costs were to be recognized.

The correct answer is older; lower; higher.

Explanation:

The FIFO method assumes that the next item to be sold is the one that has more time to be stored. In an economy with rising prices (during inflation), it is common for companies to use during their beginnings to increase the value of their assets. As the oldest and cheapest goods are sold, the newest and most expensive goods are kept as company assets. The cost of sale will be the oldest of the existing acquisition prices, and the final stocks will coincide with the last entries in the company's warehouse. Having the most expensive inventory and the lowest cost of products sold allows the company to show better economic performance. However, as they grow, some companies prefer to change their inventory accounting system to LIFO to reduce the payment of taxes. FIFO is an acronym that means "first to enter, first to leave." With this inventory valuation method, the company counts the inventory value received first when sales are made. One of the most common reasons that a company decides to use FIFO is because it is a more natural way in a straight line, since you count your first inventory as in the first items sold. This makes it especially useful when tracking inventory items is simple.