Hi Daniel
Let me try to explain this further for you.
At first Charles has $120 more than Benedict and then he, Charles, transfers 3/5 (60%) to Benedict. Before I continue let me take a slight comparison ....
Taking 60% of a total number, say 25, is the same as taken 60% of two numbers that when added together make 25, say 10 & 15. Using apples -->
If you had 25 apples (10 apples in box A and 15 apples in box

and sold 60% (3/5) of the apples. Then you would have sold 3/5 of 10 apples from Box A --> 6 apples and 3/5 of 15 apples from box B --> 9 apples. You sold a total of 15 apples (3/5 of 25 --> 15).
Continuing ....
Like the apple example above, when Charles transfers 3/5 of his total money to Benedict we must transfer 3/5 of the $120 (he had $120 more) and 3/5 of the amount we do not know (represented by the bar). So we do not really exclude the $120 we just perform the 3/5 transfer in 2 steps since Charles' money consists of a known amount and an unknown amount. This should address your concern over why we take 3/5 of the $120.
For the second part of the question, Why do we break both Charles' and Benedicts "bar" into 5 units?
- Since we are trying to take 3/5 of Charles' money we must break Charles' bar into 5units. Then he transfers 3units to Benedict and keeps 2units for himself.
- Do you remember that the bar for Charles (excluding the $120) is the same as the bar for Benedict? Therefore, since we break Charles' bar into 5 units we do the same for Benedict (most important rule for model drawing --- Equal Parts).
I hope this addresses your questions. Let me know if you require further explaination.