Android Studio - Issue with Android SDK on Windows 7
Try updating your Android SDK to r22 http://dl.google.com/android/installer_r22-windows.exe
I had the same issue, once I updated to the latest SDK, Android Studio was able to find the android-sdk folder.
I was having this same issue. First download the latest SDK as described by dues71 and put it someplace you will remember (for instance C:\AndroidSDK). In Android Studio select your project and select File->Project Structure (or select the 
icon ). On the left, under Project Settings select Modules and select the Dependencies tab. In row that says "Module SDK" select "New..." and select "Android SDK". Navigate to root sdk directory (i.e. C:\AndroidSDK) and select OK. Select the latest Android SDK. It will now index the directory which may take some time, but after that is complete it should work.
I tryed to update Android SDK to latest 22 version and then restarted IDE (I had same issue on Intellij IDEA 13 EAP), I think this would work on Android Studio too.