The best part is that it can be a no sew project. I love those.
I left the round collar in tact. Using sharp scissors, I cut a triangle shape from the shirt. The collar being the top of the triangle, cutting down where the shirt would fall on the shoulder blades out towards where the shirt rubs between the hips and the arms. So the child can just slip the collar on over his head and the cape hangs behind. Whoala!