The correct option is
A Statements 1 and 2 are correct
Fossils are the preserved remains, or traces of ancient organisms in rocks that existed in the past. It can be of different types like molds, casts or faecal matter. A fossil can be an entire organism or just part of an organism. Examples of fossils include bones, shells, feathers, exoskeletons, stone imprints of animals or microbes, hair, oil, coal, DNA remnants etc.
The study of fossils is called paleontology and the scientists who study fossils are known as paleontologists. Studying fossils can help us to ascertain how the organisms underwent evolution, their ancestors and related organisms. For example the evolutionary history of the horse with all the intermediate forms is available. So, statement 1 is correct.
By techniques such as carbon dating, one can understand during which time scale the fossilised organism existed.
Evidence says that evolution of life forms has indeed taken place on Earth and has come from many quarters. Fossils are preserved remains of hard parts of life-forms found in rocks. Rocks form sediments and a cross-section of Earth's crust indicates the arrangement of sediments one over the other during the long history of Earth.
Different-aged rock sediments contain fossils of different life-forms which existed in that specific era or period. The ones which were present in the history of evolution early will be present deep in the strata layers and the ones which were newly evolved will be present in the upper strata layers.
So, statement 2 is correct.
Although fossils represent dead remains of the organism, it does not always mean that the organism in question has become extinct. Fossils of organisms that can even be found today means that the organisms have been on the Earth for a very long time. Various fossils of mosquitoes, cockroaches, frogs, marine organisms etc. are being discovered even though they are not extinct.
Hence statement 3 is incorrect.