House+Boat=1st grader

We recently visited a relative and during casual chit chats asked chechy how is her grand daughter doing ,last time when I saw her she was on crawling stage. I was told she got admission in to a famous school in the city as a first grader. But when I heard about the procedures she had to undergo for getting that admission my eyes almost fell out.
Only about five and a half years old,that little girl was expected to do a written test and appear for an interview afterwards. An example of one of the questions was 'house +boat,and the poor child was expected to make the connection and write houseboat!!! First I was thinking how on earth such a little girl can make that connection.! And then the shock was even severe when I thought how was she supposed to be even reading those words clearly!.! House ,for me is a big word for a five year old, and here she is expected  not only to figure out the words house and boat but also to make the connection and make a new word.
I cannot understand the psychology of whoever prepared such a questionaire for little kids. My first reaction was to say, the parents has to be saluted for making the child to  take  such  excruciating steps at such an early stage,but they said we didn't know all these..!. Now what to say,...