Preheat your oven to 350 degrees Fahrenheit. Line your cake pans with parchment paper. Grease them lightly so the cake comes out easily after baking.

Add softened butter and sugar to a large bowl. Beat with a mixer until light and fluffy. This step helps create a soft texture.

Add eggs one at a time into the mixture. Mix well after each egg. Then add vanilla extract and coconut extract for rich flavor.

In another bowl, combine flour, baking powder and salt. Stir well so everything mixes evenly. This helps the cake bake properly.

Slowly add dry ingredients into the wet mixture. Pour coconut milk in between mixing. Stir gently until smooth batter forms. Avoid overmixing.

Divide the batter evenly into prepared pans. Smooth the tops. Bake for 30 minutes until golden. A toothpick should come out clean.

Remove cakes from the oven. Let them cool in pans for 10 minutes. Then transfer to a rack and cool completely.

In a bowl, beat butter until creamy. Add powdered sugar slowly. Pour coconut milk and extracts. Beat until smooth and fluffy frosting forms.

Place one cake layer on a plate. Spread frosting evenly. Add second layer on top. Cover entire cake with frosting.

Press shredded coconut all over the cake. Cover the sides and top well. This gives a beautiful and classic coconut look.