Quick Beginners Question on Half-Damage

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Apologies in advance if this is a dumb question...

My daughter and I have just started playing the adventure starter kit and we're in a heated debate on an issue with the Feldgling White Dragon in Encounter 2: Worship, if the White Dragon uses it's breath weapon and hits 2 of the 5 in the party (meaning that 3 in the party had a Reflex score that was higher than the roll +4.) Does this mean that the he missed the other 3 and they have to take half-damage, or that he hit 2 and they take the normal damage and there is no impact to the other 3. The debate we are having is whether he hit all 5, but only 2 of them have been damaged or he missed the other 3.

 Thanks in advance for any help you can offer here. We don't want to violate the whole "no throwing dice at each other rule" ;)

2 were hit for full damage

3 were missed, and take half damage, which is the full damage divided by two, and rounded down if the full damage is an odd number.  
Thanks very much for replying so quickly.
 
Just to clarify here, if all 5 party members are in the blast area, the dragon should be making 5 attack rolls (one per target) and 1 damage roll. 
  Any target that is hit takes the damage rolled.  
  Any target that is missed takes half the damage rolled (subtract any resistance first,  and then divide, rounding down)
  Any target that is critically hit (20 on the d20) takes the damage as if the damage roll had been maximized.

All Close and Area type attacks follow the standard of one attack roll per target but a single shared damage roll.  If a creature has the attacker marked, the mark is satisfied as long as the mark-er is included in the attack's targets, so no penalty is applied to any other target attack roll.
  Melee and Ranged attacks, if they allow for multiple targets/multiple attacks are separate attack rolls and damage rolls per attack.  If a creature has the attacker marked, then any attack that isn't against the mark-er is penalized as usual for the mark (usually -2 to hit).