So hmmm 7% of anything is (7/100) * anything.
now... how much iodine is in the 20oz solution? well (7/100) * 20, or 1.4 is iodine, the rest is some other substances, but 1.4oz is iodine.
now, he wants to drop it to a mixture of 4% iodine, let's say the mixture "m" in ounces, has 4% iodine, how much is that? well (4/100) * m, or 0.04m.
well, he wants to do so by adding say "a" oz of pure alcohol... how much iodine in the alcohol? none or 0%, or (0/100) * a, or 0.00a or just 0a or 0 anyway.

now, whatever "m" may be, we know that 20 + a = m, and we also know likewise that 1.4+0 = 0.04m.