I got this craft idea from No Time for Flash Cards.
Get a blue piece of construction paper and let your child color some waves on there. On the NTFFC blog she had her son put on some stickers that were fish and ocean sea life creatures, but we don't have any of those, so we just have waves.
Cut out a lowercase "l" from a white sheet of paper. Have your child glue it onto the blue sheet. Cut out a red triangle for the roof, and a yellow light shape. Glue them on in the appropriate places. Voila! You have a fancy "l" lighthouse!