[i]BEGIN BAG BOTTOM
With circular needle, CO 39 sts. K 34 rows in garter st.
Pick up and k 16 sts along the left edge of rectangle just worked. Pick up and k 39 sts along the CO edge. Pick up and k 16 sts along rem side. [110 sts total][/i]
It looks to me like you knit the bottom back and forth and THEN use your needle in the round.