Option 2 is correct. If the NPC is not clear about where the information is located, Google FAFSA pdf for the most recent year (2021-22 until the new one comes out October 1). You’ll find directions there on how to report each item.
Note that there have been some substantial changes to the EFC formula for 2022-23. Many families won’t see any difference in their EFC as a result of the changes, but others will. You’ll need to wait until the NPCs have been updated after October 1 (may take awhile, depending on the school) to get a more accurate result.