Question

Which statement correctly explains how magnesium and chlorine combine to form magnesium chloride?

Answer 1

An Mg atom donates one electron to each of the two Cl atoms.

Answer 2

You did not include the statements but since magnesium chloride is ionic substance that we know that magnesium and chlorine formed an ionic bond.  Therefore your statement most likely will talk about how one magnesium atom gave up 2 electrons while two chlorine atoms took 1 electron.  The reaction looks like Mg+2Cl⇒MgCl₂.  
I hope this helps.  Let me know in the comments if anything is unclear.