The issue can be resolved by modifying the access list to ensure that Telnet traffic is allowed. Sequence 20 already permits Telnet traffic from the PC (source) to the server (destination), but you need to ensure that the access list explicitly permits traffic. Removing sequence 20 and adding it back doesn't provide any additional permissions. Instead, replacing sequence 20 with the permission for Telnet traffic stated in sequence 40 ensures the access list allows the necessary traffic for a successful Telnet session.