1. Baste interfacing rectangles to wrong side of bag body rectangles, machine-stitching a scant 1/4" from the edges. (Using the interfacing will give your gift bag more body and help it retain its shape.)
2. Cut a 1-1/2" square from each bottom corner of interfaced bag body rectangles (Diagram 1). Repeat to cut squares from bottom corners of lining rectangles.
3. Fold the A print 1-1/8x3" bias strip in half lengthwise; sew together long edges with 1/4" seam. Turn right side out and press; trim to 2-1/2" long. Fold in half to make a loop. With right sides together, center loop ends along top edge of bag body back rectangle; baste in place (Diagram 2).
4. Fold each print B 2-1/4x10" strip in half lengthwise and join long edges with 1/2" seam. Without trimming seams, turn tubes right side out to make handles; press. With right sides together, center ends of one handle along top edge of bag body back rectangle, 3-1/8" from outer edges; baste in place. Repeat to baste remaining handle to bag body front rectangle.
5. Join bag body rectangles along side and bottom edges to make bag body (Diagram 3). Press seams open.
6. To box bottom corners, match each side seam of bag body with the bottom seam; stitch across resulting straight edge (Diagram 4). Turn bag body right side out.
7. Repeat Step 5 with lining rectangles, leaving 4" opening along one side, to make lining.
8. Repeat Step 6 to box bottom corners of lining. Do not turn lining right side out.
9. Insert bag body into lining (they will be right sides together). Sew together around top edge
10. Turn bag body and lining to right side through opening in lining side seam. Hand-stitch opening closed. Push lining down into bag body and press upper edge of bag. Topstitch 1/4" from bag upper edge through all layers.
11. Press creases into bag sides to resemble a lunch sack. Insert cardboard rectangle into bag to reinforce bag bottom. Hand-stitch button to front of bag to hold loop in place.