While "situated" is a valid translation, it's not a very good choice of word, because it can refer to non-physical issues, like international policies. Even in a physical sense, "situated" requires reference to things around the main subject/object of the verb. "Located" is a much better word to use - it refers to actual physical location (whether on a map or elsewhere) and doesn't carry with it the nuances and connotations of non-physicality or references to other things, as "situated" does.
It may be that находиться can be used in a way which makes "situated" a better choice, but when talking about where some thing is, then "located" is a far better word to use.
Example: "America is situation between Canada and Mexico in the North American continent of the western hemisphere." "America is located there [pointing on a map].)
In other words, allowing "situated" when you actually mean "located" would be teaching non-native English-speakers poor English "diction" = "choice of word".
Duo may eventually allow it in this particular exercise, but I think that would be a mistake.
Америка appears to be in nominative case, which would be proper if the sentence were simply где Америка?
Находится doesn't change the case - Америка is not the object of the verb, but the subject, plus the verb is reflexive (-ся makes it so, I believe), so it can't have an object. In any event, for orientation as to case, I look at the sentence as stating "America is where?".