Daniel goes to the Cobra Kai dojo to tell Silver that he won't enter the tournament, he then discovers that Silver is evil and that Kreese is still alive. Barnes is also there and they are about to beat Daniel to death when Miyagi saves him and wipes the floor with all three of the villains. Daniel defeats Barnes in the final of the tournament.
H.R.H. The King Of The Internet
Mr. Kesuke Miyagi: Inside you same place you karate come from.
Daniel Larusso: My karate comes from you.
Mr. Kesuke Miyagi: Ah. Only root karate come from Miyagi. Just like bonsai choose own way grow because root strong you choose own way do karate same reason.
Daniel Larusso: I do it your way.
Mr. Kesuke Miyagi: Hai. One day you do own way.
Trivia: When Daniel is persuading Myagi to use his college money to buy a store for selling Bonsai trees, he takes a wad of cash, smells it, and says, "Hmm. Looks like money.smells like money." Ralph Macchio has practically no sense of smell at all, so just for fun he always makes a point to smell something in every movie he does.Matty Blast
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