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I have created an image in photoshop 7 and am now attempting to save it as a png. I click "Save As" and am presented with a save file dialog with *.PSD selected by default. If I then select *.PNG a yellow triangle with a black exclamation mark appears next to a greyed out box called "Layers" and the message "file must be saved as a copy with this selection" appears. This is confusing me because the image is comprised of only a single layer.

How do I resolve this?

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You can't easily, just save it as a .PNG. What that warning means is that PNG format cannot hold all of the information that is currently defined about image. Having a single layer is not the same to photoshop as a file format that simply contains a single layer of image data (If you open a .PNG, note that it has only one layer, but also that that one layer is locked and labeled "background"), because there are additional pieces of information that are held in a photoshop "layer" (channels, blending options, etc.) which cannot be contained in simple raster image formats.

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