Steps:
- Preheat the oven to 350 degrees F. Beat the egg whites to soft peaks, while gradually adding 1/2 cup of the sugar. In a separate bowl, beat the egg yolks until thick. Cream the butter with the vanilla and beat in the remaining 1 cup sugar. Stir the egg yolks into the butter mixture and cream well. Sift the flour, baking powder, and salt together 3 times. Add enough milk to the reserved coconut milk to make 1 cup liquid. Alternate adding coconut liquid and flour mixture to the butter mixture. Blend in 1/4 cup of the coconut grating and beat well. Fold in the egg whites. Pour into two 9-inch or three 8-inch layer pans. Bake for 25 to 30 minutes. Frost the cake layers, assemble, and sprinkle with the remaining coconut grating.
- Combine the sugar, milk, butter, and vanilla. Cook for about 5 minutes, until the mixture begins to thicken. Mix in the coconut. Frosts one 8- or 9-inch layered cake.
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