A retailer of washing machines receives a rebate of $25 per machine purchased if total purchases exceed 1,000 units. On reviewing the inventory records in December, it discovers that it has purchased 1,100 units during the year. The company claims the rebate immediately but it is not received until January.

Required
Prepare journal entries to record the claiming of the rebate and its receipt. What effect do these events have on the inventory valuation on December 31?