Sentence 1: Cathy's daughter recently told her about a special friend. 
 Sentence 3: Cathy asked her daughter several questions about her friend 
 Sentence 4:  Cathy then realized that her daughter had an imaginary friend 
 Sentence 5:  Cathy smiled, because she remembered her imaginary friend as well 
 Option 1: Cathy knew her daughter's, friend's, mother very well. 
 Option 2: Cathy found it odd that her daughter even had a friend.