Teddy correctly set up the inequality \(5x + 400 > 1000\), where \(x\) is the number of customers served. After solving, he found \(x > 120\).
The correct interpretation of this solution in the context of the problem is:
James needs to serve more than 120 customers this week to meet his goal.
This means that to exceed his goal of earning more than $1,000, James has to serve more than 120 customers in the week.