Just don't over-analyze. Just think of your 4" square minus 1/4" on the top= 3 3/4 minus another 1/4" on the bottom - 3 1/2. You now have a rectangle 3 1/2 by 4. OK, you still have to sew the sides. 1/4" off the left side and your rectangle is now 3 3/4 horizontally by 3 1/2 vertically. Sew another 1/4 seam on the right side and your rectangle is now a 3 1/2" square.