Import errors and Hello World activity won't run in IDEA 12

Please see the screenshot below. I have a feeling I've got the SDKs configured incorrectly, but I'm not sure how to solve it. I tried Googling for answers but no one had this exact problem.

Do I have the wrong Java version maybe? It seems like the two SDKs might be conflicting with each other.

I made this project via:

1. Create New Project
2. Android > Application Module
3. Defaults and Finish