The drawing opposite shows how the cuts are made.
Bisect AB at D, and BC at E. Extend AE to F so that EF equals EB. Bisect AF at G, then, with G as the centre, describe the arc AHF. Extend EB to H. With E as the centre, draw the arc HJ. Make JK equal to BE. From D and K drop perpendiculars on EJ to obtain points L and M. The four pieces can now be rearranged to make a perfect square.