What is the proper subject pronoun to use when speaking formally to two or more people in spain?

a. vosotros
b. ellos
c. usted
d. ustedes

Recall the pronoun chart:

Yo                 ||  Nosotros

Tu                 || (vosotros)

Usted/el/ella || Ustedes/ellos/ellas

We can immediately eliminate B and C, because ellos is "them" not "you all" and usted is the singular "you".

This is a tricky question because in Spain, remember that they use vosotros, unlike in Latin America. But if you look at the chart, remember that tu is an informal pronoun; if its plural counterpart is vosotros, then vosotros must also be informal. Ustedes, on the other hand, is the formal version of "you all". It is used as the informal AND formal "you all" in Latin America, but in Spain it acts only as the formal pronoun. 

So if you are talking to two or more people in Spain, you'll want to use option D, ustedes. 

Coming from a spanish heritage, i can tell you that is incorrect. the correct way is ella los come (manzanas) todos los dias.

B) la educación física.