CIT-001 secton 8B confusion! - grandparents

[DABnyc]

My wife (Canadian born) and I (US born) are applying for citizenship for our 4 children. The only part of the CIT-001 form that we cannot figure out is section 8B. On the instructions it says "Check the box to indicate if one of your grandparents was a Canadian citizen at the time of your Canadian parents’ birth or adoption." - but on the form it first says "If the applicant's parent was born outside of Canada, was one of his/her parents a Canadian citizen at the time of his/her birth?" Well my wife's parents were citizens of course - but she was born in Canada, not outside. One has to check 'Yes' in order to fill out the grandparents information. So I would presume then that we leave it blank. But then I go back and read the guide online - and wonder if that's correct.
My area (below) stays blank. Very confused!

 

[alphazip]

For the section that applies to your wife (8B, 1 & 2), write N/A between the NO and YES boxes and do not list the grandparents. CIC will know from Section 8A that your wife was born in Canada, and that is all it takes for her children to be Canadian citizens. For the section that applies to you (8B, 3 & 4), check both NO boxes and do not list the grandparents.

 

[DABnyc]

Thank you very much! That makes perfect sense.