Preheat the oven to 350 degrees and grease two 6-inch round cake pans.

In a mixing bowl, cream the 1/4 cup softened butter with the granulated sugar until light. Add the egg and 1 teaspoon vanilla extract and beat until smooth.

Stir together the flour and baking powder in a separate bowl. Add half the dry mixture to the butter mixture, then pour in half the milk. Repeat with the remaining dry mixture and milk until just combined.

Fold in the rainbow sprinkles. Divide the batter evenly between the two pans and bake for 22 to 25 minutes until a toothpick comes out clean. Let the layers cool completely.

For the frosting, beat the 1/2 cup softened butter with the powdered sugar, 1 tablespoon milk, and 1/2 teaspoon vanilla extract until creamy. Add green food coloring a drop at a time until the desired shade is reached.

Place one cooled cake layer on a plate and spread a thin layer of green frosting on top. Set the second layer over it and frost the top and sides. Finish with Halloween-themed sprinkles scattered over the surface.