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Slip the pre-hung door into the door frame. Make sure the door opens in the desired direction. Slip shims between the door casing and the frame to bring it into level and plumb.
Tip: Have another person help move and position the door. Interior doors may not be as heavy as exterior doors, but they're still awkward to handle.
Drive screws through the door casing into the door frame. Make sure to drive screws through any shims to hold them in place and firm up the door.
Install a doorknob using the existing holes in the door and casing. If the door doesn't have holes, use the templates that come with the doorknob set to mark the correct hole positions. Use a hole saw and a spade bit to cut the holes in the door and casing according to the manufacturer's directions
Position 4' x 8' sheets of drywall and attach to the wall studs with drywall screws. Install the drywall sheets horizontally, making sure both ends of each sheet attach to a stud. Drive screws about 12" apart.
Use drywall tape and joint compound to smooth out the joints between drywall sheets (Image 1). Also use joint compound to fill the indentations left by the screw heads (Image 2). Apply three thin coats of joint compound, allowing it to dry in between coats.
Sand the joint compound smooth. Prime and paint the wall as desired.