Adobe Illustrator: Images With Round Corners

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I’ve labored for hours now but I finally figured it out. If you want to use an image in Adobe Illustrator, and you want it to have round corners, here’s what you do:
1. Place your image on the artboard (File, Place)

  1. Draw a rounded rectangle over it in the same layer

  2. Target both the rectangle and the image(Shift + Click)

  3. Select Clipping Mask, Make from the Object menu

Voila!
So far I’m not really sure how to add a drop shadow or a border to it without creating new layers.