Teddy correctly wrote the inequality \(5x + 400 > 1000\) to represent the situation where James earns $400 a week plus $5 in tips per customer, and he wants to know how many customers he needs to serve to exceed his $1,000 goal.
After solving the inequality, Teddy found that \(x > 120\). This means that James must serve more than 120 customers in order to meet his earning goal of more than $1,000 for the week.
Therefore, the correct interpretation of Teddy's solution in the context of the problem is:
James needs to serve more than 120 customers this week to meet his goal.