[abridged] We model the X-ray reprocessing from a strong co-rotating flare above an accretion disk in active galactic nuclei. We explore the horizontal structure and evolution of the underlying hot spot. To obtain the spectral evolution seen by a distant observer, we apply a general relativity ray-tracing technique. We concentrate on the energy band around the iron K-line, where the relativistic effects are most pronounced. Persistent flares lasting for a significant fraction of the orbital time scale and short, transient flares are considered. In our time-resolved analysis, the spectra recorded by a distant observer depend on the position of the flare/spot with respect to the central black hole. If the flare duration significantly exceeds the light travel time across the spot, then the spot horizontal stratification is unimportant. On the other hand, if the flare duration is comparable to the light travel time across the spot radius, the lightcurves exhibit a typical asymmetry in their time profiles. The sequence of dynamical spectra proceeds from more strongly to less strongly ionized re-emission. At all locations within the spot the spectral intensity increases towards edge-on emission angles, revealing the limb brightening effect. Future X-ray observatories with significantly larger effective collecting areas will enable to spectroscopically map out the azimuthal irradiation structure of the accretion disk and to localize persistent flares. If the hot spot is not located too close to the marginally stable orbit of the black hole, it will be possible to probe the reflecting medium via the sub-structure of the iron K-line. Indications for transient flares will only be obtained from analyzing the observed lightcurves on the gravitational time scale of the accreting supermassive black hole.