Question：Which of the following statements is correct in connection with the share premium account?
A. It can be used to pay a dividend.
B. It cannot be changed into share capital.
C. It is an example of a capital reserve.
D. It represents the excess received above the market value when shares are issued by a company.
The correct answer is:It is an example of a capital reserve.
The share premium represents amounts received from a share issue in excess of par value. It cannot be used to pay dividends but can be used to fund bonus issues of shares.
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