On dissolution, goodwill account is transferred to:

On the Debit of Realisation Account

The correct answer is option 1- On the Debit of Realisation Account.

All assets including goodwill of the firm is transferred to the debit side of the Realisation A/c. The journal entry for it will be-
Realisation A/c Dr.
  To Assets (Individually) A/c
(Assets are transferred)