If the Art 2 is the class you received the F and you retook Art 2, then it will replace the F grade but you still have to report the original and repeat grades.
If you retake a class and you receive a grade prior to the application deadline, then you would report that grade on the UC application along with the original grade.
Each UC will determine if the DE course is UC transferable but regardless, it still has to be reported and you have to submit a transcript if you enroll so you cannot leave it off.