Believe it or not. #12 is not an error. Now put the semantics of that sentence in your hat and reevaluate the entire test and the concepts that went into the test. Think about it from a pedagogical standpoint.
We're adults, we've been through school. We can make some assumptions. We can guess that a "subtraction story" like in #9 is supposed to be an explanation of the algebra problem (in 1st grade) 8 - ___ = 2.
Something like "I had 8 problems, but got 6 answers wrong. I only got 2 right."
We can establish that a subtraction story is tied to the concept of subtraction which is indicated with this symbol '-'. (I'm not going to address the picture).
We know, because we're smart 1st graders, that a story is made up of sentences. So a subtraction story, must be made up of subtraction sentences. And we know from concepts like the ones that built up to #9 that '-' is the symbol for subtraction and there's some kind of concept that an equation like 8-6=2 must be a subtraction sentence written with symbols and not words. Though this equivalence isn't easy for kids to get, which is why word problems are always so hard in maths pedagogy. But let's say I'm sharp and I get that.
Now reassess #12. The obvious related subtraction sentence, written with symbols, should be something like 7-3=4 or 7-4=3 (there's no context to let us know what we're subtracting from the lego diagram, so either answer should be correct). But we look down at the answers, and there's no '-' sign! In desperation we circle 'c' because it has all the right numbers, even if it doesn't make any sense conceptually...none of the other answers have numbers we can fit into the picture.
Now absurdly this is marked correct! Whew, my grade is saved. But my concept is broken. Subtraction sentences do not feature the symbol '-', they feature the symbol '+'. I'm 6, and I'm just being introduced to this, so what am I to think? Subtraction stories use '-' but subtraction sentences use '+'...even though stories are made up of sentences. So either my English class is wrong, or Math is wrong...
But wait. #6 uses "subtraction sentence" also, but the correct answer used a '-'! Now what am I supposed to think? We know what a number sentence is. We know what a subtraction story is. But we have no clue what a subtraction sentence is and the concept for what it is is utterly lost. Now instead of learning about subtraction, I'm an extremely frustrated 6 year old who gets through tests by random guessing instead of learning.
This isn't a bad exam, this is terribly pedagogy. As a former professional educator, my assessment is that this is the work of idiots who were purposely trying to sabotage 1st grade math education.
Here's what I think of #1 https://news.ycombinator.com/item?id=8820195
By topic #2, in 1st grade we've utterly and completely failed every child who took this test. They couldn't even get through a few weeks of school before we managed to alienate most of the class from math education and a large number of these kids will carry this around with them for the rest of their schooling.