Translation:My house is on a very pretty and small island.
Actually I think your answer should be correct. They are using جدا (very) as for the two adjectives, جميلة and صغيرة but they should have specified that. If they want to spread "very" over the two adjectives they have to literally say "very pretty, and very small" جميلة جدا وصغيرة جدا to remove any confusion.
So, it is their mistake and your sentence is actually a match for what they have provided above already.