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Preheat oven to 350°F (175°C). Grease and flour an 8-inch square baking dish.
In a medium bowl, whisk together flour, salt, baking powder, cinnamon, and nutmeg.
In a large bowl, cream together butter and sugar until light and fluffy. Beat in eggs one at a time, then stir in vanilla.
Gradually add the flour mixture to the butter mixture alternately with milk, starting and ending with the flour mixture. Fold in chopped apples.
Pour batter into the prepared baking dish and bake for 45-50 minutes or until a toothpick inserted into the center comes out clean.
For the frosting, beat cream cheese and butter together until smooth. Gradually add powdered sugar and vanilla, beating until smooth. Spread over cooled cake.