Preheat your oven to 350°F and grease two 9-inch round cake pans thoroughly with butter. Dust with flour, tapping out excess. Line the bottoms with parchment paper.

In a large mixing bowl, whisk together flour, sugar, baking powder, and salt until completely combined.

In a separate bowl, cream the softened butter until light and fluffy, about 3 minutes with an electric mixer. Gradually add coconut milk, eggs, coconut extract, and vanilla extract, beating until smooth.

Pour the wet ingredients into the dry ingredients and mix just until combined. Gently fold in the shredded coconut, ensuring even distribution throughout the batter.

Divide the batter evenly between prepared pans and smooth the tops gently. Bake for 28-32 minutes, until the tops spring back when lightly touched and a toothpick inserted in the center comes out clean or with just a few moist crumbs.

While cakes cool completely on wire racks, prepare the cream cheese frosting by beating cream cheese and butter until fluffy. Gradually add powdered sugar, coconut milk, and extract until smooth and pipeable.

Place one layer on your serving plate, spread frosting evenly, add the second layer, and frost the entire cake. Press shredded coconut all over the surface for finishing.