A construction company, Caterpillar Inc., has the following information for the year ended December 31, 2023:

• Property, plant, and equipment (PPE) cost: $8,000,000
• Accumulated depreciation: $3,200,000
• Estimated salvage value: $600,000
• Remaining useful life: 6 years
• Annual depreciation expense: $800,000
• Calculate the book value of PPE.
• Determine the new depreciation expense if the estimated useful life is reduced to 5 years.
• How would the financial statements be affected by this change in estimate?
• Discuss the importance of the Conservatism Principle in depreciation.
• How should the company record the change in depreciation expense?