Hello! I would like a detailed (dumb down version) of a step by step explanation for this problem (the solution is given so its easier to explain!)

Exercise(Earnings per share [LO4-5]) The Esposito Import Company had 1 million shares of common stock outstanding on Jan 1, 2017. The company issued additional 2 million shares on Apr 1, 2017. Its income statement reported the following items: income from continuing operations, $5 million; loss from discontinued operations, $1.6 million. Common dividends were $2 million and preferred dividends were $1 million. All of these amounts are net of tax.

Prepare the 2017 EPS presentation for the Esposito Import Company.

Weighted average shares outstanding = 1 million *3/12 + 3 million *9/12 = 2.5 million

Earnings per share:

Income from continuing operations [(5-1)/2.5]$1.00

Loss on discontinued operations [1.6/2.5](0.64)

Net income [5-1.6-1 = 2.4 /2.5 = 0.96]$0.96