"Children, why are you bleeding?"
Translation:Kinder, warum blutet ihr?
Yes, I did that also. I think it is because one tends to use the familiar when talking to children or people close to you, and therefore Duo wants us to use du and ihr instead of Sie.
If the question had been "People, why are you bleeding?" then you would definitely have a correct answer if you used Sie.
This, and other sentences in this topic are always the same when I want to skip a level. I don't get harder material, they're always the same and I am on level 6.