In a large bowl, beat together butter, both sugars, both extracts, and egg on low, just until combined. Stir in flour, baking powder, and salt.
Divide dough in half, making sure you have 2 equal portions. Add red food coloring gel to half of the dough until the desired color is reached. Wrap each portion of dough in plastic wrap and refrigerated for 3-4 hours.
In a small bowl, combine peppermint candy and 2 tablespoons sugar. Set aside.
Preheat oven to 350 degrees F.
To make a candy cane cookie, take 1 level teaspoon of each dough. Roll each teaspoon into a 5″ rope (use a ruler, if necessary). Place one red and one white rope next to each other and begin twisting the two colors together, while pressing ends together so that they won’t unravel.
Place on an ungreased baking sheet, curving the top to one side to form the look of a candy cane. Bake for 8-10 minutes or until lightly browned. Immediately sprinkle cookies with the sugar/peppermint mixture.
Move cookies to a wire rack to finish cooling.
This recipe adapted from the Betty Crocker Original Candy Cane Cookie recipe