The "Class Canceled" option a teacher sees in their group's Take Attendance window is considered to be like an attendance entry,   and does not translate to the Master Schedule.

Course section schedules/classes cannot be modified or canceled if that course, or any other section of that course, already has attendance recorded.

To cancel a course, or change the schedule as a manager, all attendance for any section of that course must first be cleared.  

This can be done by a Schedule Manager:
1. Navigate to onRecord.
2. Procedures > Section Attendance.
3. Filter for Status: Recorded | Group Type | School Level
4. To the right of each section of the course, click "Clear"

This will then allow you to go back to the Master Schedule, and edit the schedule for the course, or cancel the section.