A series of studies was conducted to determine whether children's reasoning is capacity-limited and whether any such capacity, if it exists, is based on the working memory system. An N-term series (transitive inference) was used as the primary task in an interference paradigm. A concurrent short-term memory load was employed as the secondary task. In the first experiment, eight 7-year-olds performed the primary task while holding two digits or two colors in short-term memory. No interference was observed. In the second experiment, the preload was raised to four colors, which were required to be actively rehearsed throughout the primary task. As a secondary task, subjects were required to repeat the word "light" at a rate equivalent to articulatory effort in the memory load rehearsal. Results showed that active rehearsal did interfere with transitive inference. However, so did nonmnemonic articulation, although to a lesser extent. It was concluded that, while N-term series reasoning is capacity-limited, short-term memory is not used as a workspace. Using the easy-to-hard paradigm as a converging operation, the former conclusion was confirmed in the third experiment. Further exploration of the relationship between processing and storage showed that it is not a simple tradeoff but is influenced by similarity and proactive interference effects. (Author/RH)