La gata bebe su leche.
I translated the above sentence as "The cat drinks his milk." and got it checked as a correct answer. Shouldn't it be "The cat drinks her milk."?
Also, I have come to assume that Spanish doesn't have any idea of "it" - everything is either masculine or feminine. And, in the case where men and women are mixed, we use the masculine form. Please correct me if I am wrong.
I am at a very elementary level of learning Spanish and would appreciate your response! :)
I would agree about this, since there is also "el gato" for male cats.
Every noun is either masculine or feminine, you're right - but that's just grammatical gender. You could still call an inanimate object "it" in translating to English, but there is no neuter grammatical gender in Spanish as there is in German, for example.
If in doubt, then assume male includes neuter (or mixed groups), whereas female is specific.
In the example you give, I would say "her" is the best option, but "its" works because there is nothing in English to mark the cat as female. "His", I would say is clearly wrong.