Where is mother's knife?

I've found out the grampa has hidden it, and tried plying him with cupcakes, but I can't seem to locate the knife. Do I need to do something with the towel?

4 Answers

Give grandpa a cupcake and select "Split it with you"

Note: You have to drag the cupcake onto grandpa. If you select the cupcake dialog when you talk to him, you won't get the option to split it.

Choose to share the cupcake with grandpa.

You have to drag the cupcake to grandpa and then choose the option to split it with him. He will then throw the knife at the table and you can collect it from there.

Note that if you don't share it with him the FIRST time, you have to drag a cupcake onto your grandfather to get the dialog to split it.