I just did this a few days ago with a crop top I am making.
I added 20% more stitches under the arm and put my sleeves on some yarn to hold them for later.
(The 20% was what fit the measurements I was using.)
I then knit to the length I wanted and decreased on both sides as I went.
After the body was finished, I put the sleeves back on my needles and picked up the extra stitches under the arm. I pick up though both loops of the chain.
I am decreasing on the underside of the arm as I work toward the elbow.
I promised my DH a gnome
for his desk. He decided to put me on a deadline
so I am knitting up his little guy instead of my sleeves.