In a mixing bowl, cream together the softened butter and granulated sugar until light and fluffy.

Add the egg and vanilla extract, mixing until well combined.

In a separate bowl, whisk together the flour, baking powder, and salt.

Gradually add the dry ingredients to the wet mixture, mixing until just combined.

Preheat the oven to 350°F (175°C).

Roll out the cookie dough on a floured surface to about 1/4 inch thick.

Use a cookie cutter to cut out watermelon slice shapes and place them on a baking sheet.

Bake for 8-10 minutes or until the edges are lightly golden.

Let the cookies cool completely on a wire rack.

In a bowl, combine the powdered sugar, milk, and watermelon extract, mixing until smooth.

Divide the icing into two bowls; tint one with red food coloring and the other with green food coloring.

Frost the cookies with red icing for the watermelon flesh and green icing for the rind.