I translated the sentence as “Gdzie jest butelka z mlekiem?”. Isn’t it an acceptable translation?
Well, you'd be understood, but it sounds a bit weird for me (native speaker). 'Z' means 'with', here the genetive case is preferable
I think it's close enough to be added, although my first thought would be that it's not a bottle bought in a shop, but a plastic bottle 'with milk' for a toddler.
I think that a problem with Duolingo is that it oftentimes lacks context and so a sentence can be understood in various manners even if the course creators did not intend it to.
That’s exactly what I had in mind when translating this sentence...
Ist "jest" nessesary? Could it be "Gdzie butelka z mlekiem?"
Well, it's... less polite, but we do accept it usually, so added here.
Also it may sound like the bottle was mentioned before, for example someone was supposed to bring it and forgot it. But well, with 'jest' it can also mean that.