If you are able to view menus and playback and view previously recorded videos, it is most probable that what you have described indicates a problem with the ccd (the light sensitive chip that produces the image) or the connection to it, While your camera was on the list of Canon cameras for free repair, unfortunately, Canon discontinued the program for your model on January 31, 2012, the information at the link below does fully explain the problem and tells how Canon and other manufacturers handled it. Since more and more newer models have the identical problem the info may give you some leverage with Canon. You are the 4th person in a one month period, with a Canon camera from the list that I have advised of this problem. Click on or copy and paste the link into your browser
Note: Considering the age and present value of this camera, paying the cost of having it repaired (if parts were available), approximately $95 really depends on how attached to the camera you are. The standard "rule of thumb" is if the repair cost is greater than 50% of the value of the camera, it is not worth it. A good used Powershot S500 can be purchased for about $35 and I've seen a fully refurbished ones for as low as $65.
Please keep in mind that my diagnosis & solutions provided are directly dependent on the accuracy of your description of the problem. As with any "do it yourself" fixes, success is a "team effort", since I can't see or touch the camera, and relies on the customer's manual dexterity and ability to follow the instructions well.
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