Download the two files:

First - open the files, select the cat and drag it over the background image.

Name the layer "cat".

Use magic Wand and click outside the cat on a new "cat" layer.

Then go Select > Inverse

Create a new layer (Layer 1)

Edit > Fill

Choose Black color

It should look like this.

Then Drag this layer below the cat layer.

Use Rectangular Marquee tool to make a selection on Layer 1.

Edit > Cut

Edit > Paste

With Move tool - move the layer like on the image on the left.

Edit > Transform > Distort

Distort the bottom part of the shadow.

Hit Return"overlay"

Now back to Layers palette.

Choose "overlay" blending mode for Layer 2

Should look loke this.

Blur the shadow to make it more realistic.

Use Gaussian Blur Filter or Blur Tool

If you choose to use Gaussian Blur Filter - adjust the settings..

Like this.

Should look like this.

Duplicate Layer 1

Change blending mode to "normal"

Change Layer opacity,

 

Use Large Soft Eraser to lighten up the areas that are further away from the cat. You can use Blur Tool to soften the edges of the shadows.

Done!