You figured that if you want both of you to become kindergarten age that Katrina that both would have to be touching it. We see that both are touching it and that Katrina was touching the third knob with out either seeing it.
The next thing they know is that Katrina is in a little boys outfit and she sees you are in a dress tights and Mary Jane shoes.
Just then your mom comes in and tells you that it's time for your nap and then you and Karl(Katrina) can go out to play. We see that the watch had also change his room to one that looked like a little girls.
We find that you still have the watch so you put it in a drawer and lay down and fall asleep. You remember that your mom told you that up until you were 7 that you still had accidents and right now you are 5.
When you wake up you see that Katrina is still asleep but that you had an accident while sleeping.