VM1 is already in VNET1/Subnet1.
VM2 is on VNET1/Subnet2, and must be moved to VNET1/Subnet1.
Note:
Create an internal Basic Azure Load Balancer named LB1 and connect the load balancer to VNET1/Subnet1
![AZ-104_547E.png related to the Microsoft AZ-104 Exam](/static/microsoft/AZ-104_images/AZ-104_547E.png)
Reference:
https://docs.microsoft.com/en-us/azure/load-balancer/quickstart-load-balancer-standard-internal-portal