First we bought a 24 inch letter from Hobby Lobby for $14 and a set of out down lights from Target for $25. We them drilled holes in the wood to fit the lights. And glued an L shaped trim, called corner trim, all around the letter to hide the wire from the lights.
You can see the L shape of the trim
Then it was all spray painted blue.
Then we placed the lights and wrapped the wire inside of the back of the letter to hide them