D. Redgrapes recognizes a decrease in non-controlling interest of 350 and a decrease in cash of 500. The remaining 150 is recognized as goodwill.

When Redgrapes acquires an additional 20% interest in EHC, it is already the controlling shareholder. Therefore, this is an intra-group transaction, and the consideration paid (500) should be allocated between the non-controlling interest and the parent's equity. The non-controlling interest's share of the fair value of EHC at the acquisition date is calculated based on their proportionate ownership, which is 20% of the total fair value less the existing non-controlling interest balance.

Assuming the total fair value of EHC at 1 January 20X1 is 3500 (as 700 represents 20% of this value), the non-controlling interest's share of the additional 20% would be 20% of 3500, which is 700. However, since Redgrapes only paid 500, the non-controlling interest's share is limited to this amount, resulting in a decrease in non-controlling interest of 500 (their original 700 minus the 200 they should have received based on the fair value).

The difference between the amount paid (500) and the non-controlling interest's share (500) is 0, which means there is no goodwill recognized. However, the remaining 150 (700 - 500) that the non-controlling interest should have received according to the fair value but did not receive is recognized as an increase in goodwill on Redgrapes' books. Therefore, the correct statement is D.