The problem (with this type of sentence and this method in general) though is that once you've heard it once or twice, it's memorized, because it stands out. Then, we just answer from, "oh, it's THAT sentence" memory, rather than having to think it through. We really need more mix-and-match type sentences, rather than the same "toughies" repeating over and over.
In German, the gender of the noun doesn't refer to the actual gender of the thing. That's why Maedchen is neuter even though all Maedchen would be female. Similarly, all bears, even she-bears are referred to as der Baer.
To complicate things, when things have an actual gender a pronoun will refer to the thing's actual gender. So, das Maedchen is neuter, but you would still use ihr instead of sein.
3 years late but for anyone reading ho wants a very basic answer: it's because it's "her" dress (someone unmentioned explicitly in the sentence), not the bear's. In the same way you could say "Phillip is wearing her dress" with "her" being some unnamed person, but known as the owner of the dress.
There are two parts to answer your question:
"Der Bär" is masculine. "Das Bär" would be neutral, but the correct form is "Der Bär."
It would be "seine" if it were referring to the bear's dresses (or another male's dresses), but it is referring to someone else's dresses, namely a female, which is why we have "ihre."
In my opinion this is a really silly question to ask someone at this stage of the course and is likely to cause more harm than good. Specifically because it refers to a person that isn't mentioned in the sentence.
So the bear is wearing some woman's dresses? Fair enough. But considering we as students are only starting to grasp the concept of possessive articles relating to the gender of the noun then why not say something like:
"Der Bär kennt Julia und trägt Ihre Kleider."
That way we have a chance to figure out that we're not to use "...seine Kleider" like in many of the other examples in this module and it pushes us to recall vocabulary from an earlier module.
I don't get it! I thought the acc pronoun for "her" was "sie", "irh" being the Dative pronoun. Where do I get it wrong? As for the comments on the ineptie of the sentence I think we need to learn structures on which we can build new meaning by changing the words and IMHO this is a great way to do it.
It should be Die Bärin though. You cannot mix genders in german it's just weird and nobody does it but the foreigners, I mean c'mon. It's either Die Bärin - ihre or Der Bär - seine. The statement that some german words do not match with the actual gender(like the word girl) is invalid when we talk about professions, animals and nationalities. It IS a mistake, not an option.
But I'm not a rapper.