In town, Laura is letting Nellie ride Bunny until her Pa is finished in the store. Nellie wants the horse and gets her father to offer Laura $5 for it but she refuses. At home, Carrie asks Pa about Christmas and he tells her the abbreviated version of the first Christmas. In private, Laura, Mary, Pa and Ma each count their monies to see how much they have. Mary quizzes Ma about what to get for Pa and Laura quizzes Pa on what to get Ma. Mary finds a hole in one of Pa's shirts and gets an idea. The family heads into town to shop at the Mercantile where Charles notices Mrs. Oleson marking up the prices on the store's merchandise. Both Pa and Laura notice Ma's interest in a wood stove that costs $7.87; while Mary prices fabrics. In the storeroom, Nels asks Charles where he can find some wagon wheels. Charles offers to refurbish some used wheels for $8 and deliver them before Christmas.
Caroline is feeding the chickens when Charles rolls up with a wagon full of old wheels. She asks him about them but he tells her that Christmas is not the time to be asking questions. After school, Mary tells Laura to go home without her. She has a secret project she is working on. Laura is watching Pa do some woodworking in the barn. She stoops to look under a table but he shoos her away. Pa repeats his mantra that Christmas is not the time to be asking questions. Laura observes that it is a time for secrets. Mary's excited about the prospect of working for Mrs. Whipple, the town's seamstress. And Ma seems to be selling a lot more eggs at the Mercantile. That evening, Pa is working on his wagon wheels when Laura calls on him. Seems everybody know what to do about Christmas except her. On her way back to the house, she pets Bunny and gets an idea. The next day, the family is heading back into town again and Laura asks Pa if she can ride Bunny into town instead of riding in the wagon. He okays it. At Mrs. Whipple's, Mary is working on a shirt for Pa. At the Mercantile, Ma is buying some fabric just like the fabric Mary picked out. Mr. Oleson asks Charles about his wheels and then it's Laura's turn. She and Mr. Oleson begin a whispered bargaining session before Laura is satisfied and they shake on it. When they're done, he is obviously happy about the arrangement as he is singing "Jingle Bells" which is also what the family is singing as they ride home.
Laura knocks on the barn door but before she can come in Pa has to hide something he's been working on. Later, she enlists Ma's help in another project she is working on. When the house is finally empty, Caroline pulls out the fabric she bought and begins working on Charles' new shirt. Laura takes Carrie into Oleson's so she can spend her penny. Much later, Mr. oleson is in the store after closing when he hears a knock at the door. It is Charles with the 4 like-new wagon wheels. He tells Oleson that he doesn't want to get paid--he'll take the stove and 13 cents worth of candy. However, Oleson can't sell him the stove because it is already promised to another customer. He tells Charles that if he wants to order one, it will take 10-12 weeks and tries to get him to buy something else.
It is Christmas Eve day and Pa is out hunting. He bags a turkey. At the house it is snowing again as Ma is baking and complaining about her oven. Pa is playing his fiddle and everyone else is dancing when Oleson arrives with a large crate addressed to Caroline. Laura is all smiles. In bed, Caroline tries to find out what's in the box from Charles. He gets up to find Carrie worrying about Santa Claus coming down the chimney and getting burned up in the fireplace.
It is Christmas morning and everyone is opening up their presents. Jack gets a gingerbread man, Carrie gets a necklace, Pa gets a knitted muffler and Mary gets a fur wrap. She hands Pa her present: a new shirt. When Ma sees it, she hides her present under the tree. Pa gives Laura her present and when she opens it, she is silent for a moment. It is a saddle. Ma is getting impatient about what's in the big box. She uses a hammer to open the lid and find the stove she'd been looking at. Charles thinks it's his gift but everyone is surprised when Caroline reads the card and finds out it came from Laura. Just then, Oleson arrives with Nellie to pick up Bunny. He tells them that Laura was a smart trader. Before anyone else can react, Laura tells Nellie to join her outside so she can get Bunny. At the barn, Laura bids a tearful goodbye to her horse and then leads her out of the barn to hand her over to Mr. Oleson. Back in the house, Laura cries as her mother thanks her for the stove. Ma tells her not to cry but she is not crying over Bunny but for the hard work Pa put on her new saddle. Carrie has Pa unwrap her present: a silver star for baby Jesus which, with Pa's help, she puts on top of the Christmas tree.