Remove crown molding on the bottom of the wall where the fireplace will go.
Cut 2x4's to size based on desired dimensions of fireplace and height of the ceiling.
Create the frame of the fireplace using pocket holes and screws. Attach the frame to both the ceiling and the walls.
Create the frame where the fireplace will be attached into.
Create additional supports with the fireplace frame for attaching the fireplace and drywall.
Attach drywall to the frame of the fireplace.
Seal the drywall, then apply roman clay to the fireplace and allow time to dry.
Attach fireplace piece into it's frame.