Answer:
Michael's and Molly's
Step-by-step explanation:
The above option is the correct use of 's to show separate ownership in the sentence.
This particular sentence is actually referring to separate ownership. Both Michael and Molly have separate cats which would become great pals. Therefore, to show the separate ownership, we add "apostrophe + s" in their separate names.
In possessive nouns, when two or more nouns show ownership, and the ownership of each is separate, each of the nouns gets "apostrophe + s". This is to indicate separate possession.