Alice has two dogs.

The correct answer is: She

The correct answer is "she".
From the above-mentioned example, we can say that Alice is a girl and she has two dogs. Here, the subject is Alice and to represent it, we must use a third person singular number pronoun. Among the given options, the words "he", "it" and "she"  have a similar feature, but since Alice is a girl, a feminine gender pronoun must be used. So, the correct answer is "she".