East Coast Pipelines Ltd. had the following income statement data for the month of December 2010.

Sales are expected to increase in 2011 by 10% each month. Purchases and closing inventory will increase by 12% per month. Maintenance expenses will increase by 7% per month. Other expenses will increase by 15% per month. Rent and depreciation expenses are fixed expenses.
Required:
(a) Prepare pro forma income statements for each of the first six months of 2011.
(b) What do the pro forma income statements indicate?

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East Coast Pipelines Ltd. Income Statement for the month ended December 31, 2010 (in $ thousands) Sales Less: Cost of goods sold: Opening inventory Plus: Purchases Goods available for sale Less: Closing inventory Cost of goods sold Gross profit Less: Maintenance expenses 750 50 600 650 75 575 175 Rent expense Depreciation Other expenses 20 20 30 35 Earnings before taxes Less: Income tax expense (40%) Net income 105 70 28 42