The main issue I really need help with is finding the net income. I need a thorough description of how to solve this problem, especially since net income is not directly stated.

- Proactive had 7 million shares of preferred stock authorized of which 2 million were outstanding. All 2 million shares outstanding were issued in 2015 for $112 a share. The preferred stock is convertible into common stock on a two-forone basis until December 31, 2023, after which the preferred stock no longer is convertible. None of the preferred stock has been converted into common stock at December 31, 2021. There were no dividends in arrears. - Of the 13 million common shares authorized, there were 8 million shares outstanding at January 1, 2021. Proactive also sold 3 million shares at the beginning of September 2021 at a price of $52 a share. - The company has an employee stock option plan in which certain key employees and officers may purchase shares of common stock at the market price at the date of the option grant. All options are exercisable beginning one year after the date of the grant and expire if not exercised within five years of the grant date. On January 1, 2021, options for 2 million shares were outstanding at prices ranging from $45 to $53 a share. Options for 1 million shares were exercised at $49 a share at the end of June 2021. No options expired during 2021. Additional options for 1.5 million shares were granted at $55 a share during the year. The 2.5 million options outstanding at December 31 , 2021, were exercisable at $45 to $55 a share. The only changes in the shareholders' equity for 2021 were those described above, 2021 net income, and cash dividends paid. The only changes in the shareholders' equity for 2021 were those described above, 2021 net income, and cash dividends paid. Required: Explain how each of the following amounts should be determined when computing earnings per share for presentation in the income statements. For each, be specific as to the treatment of each item. 1. Numerator for basic EPS 2. Denominator for basic EPS 3. Numerator for diluted EPS 4. Denominator for diluted EPS