Which sentence correctly uses the past tense?

The sentence that uses the past tense correctly is the one that states that "They saw a movie last night." In this sentence, "saw" is the past tense form of the verb "see." This indicates that the action of watching the movie occurred in the past, specifically "last night."

In contrast, the other sentences use different tenses. The first sentence describes a habitual action using the present tense with "walks." The second sentence expresses a future action with "will dance," indicating that the dancing is planned for a later time. The last sentence employs the present continuous tense with "are reading," which indicates an ongoing action happening now. Therefore, the correct choice best reflects an action that is completed in the past.