Final answer:
The correct option is B). The correct sentence is 'Waleed and I were not watching a movie when the lights went out.' The past continuous tense is used for the ongoing action and the simple past tense for the interrupting action.
Step-by-step explanation:
The sentence 'Waleed and I ______ _______( not watch) a movie when the lights ____ ____(go) out' needs to be completed using the correct verb tenses. This sentence describes an action that was in progress at the time when another event occurred.
The correct form of the verb for an ongoing action in the past is the past continuous tense, while the simple past tense is used for the action that interrupted the ongoing action.
The correct completion of the sentence is: 'Waleed and I were not watching a movie when the lights went out.' Therefore, the correct option is B) were not watching, went.