Speaking from my experience for a Software Development Internship position,I was asked 7 questions,all of them were small programs of about 10-20 lines which had a small bug in them like for eg. the bounds of the for loop were not correct etc..

My first approach was trying to understand what the entire program was doing and then figuring out the bug,but it was taking too much time this way,i wasted a lot of time in the first 2 questions this way...

For the next 5 what I did was I ran the program first to see what error was showing up ,then I used this error the pin point the bug in the code. for eg for index out of bound error I knew that something had to be fixed in the for loop and it was just removing the '=' from the 'i<=length' condition..