I found a iPhone with passcode locked, how should I reset and restore it?

It locked with passcode and Apple ID, can I restore it on DFU mode?

What iphone is it? And unless the iphone has the setting where it resets itself after failed passcode attempts… The only thing you can do is take it to apple. DFU mode is what I believe is used for when your phone bugs out and you have to force quit everything and then power it back on

You could, but you wouldn't be able to use it anyway since you'd require the Apple ID & password at the iCloud Activation screen.

Even if you could, the original owner has contacted their carrier, and the esn/imei has been blacklisted. So you won't be using that phone on any carrier, can't use iTunes, iCloud or anything else that requires a connection to any Apple services.

So may as well turn it in to the carrier that shows on power up or an Apple store, and they can rewritten it to the owner using the esn/imei.

In all honesty to anyone other than it's owner it's a paperweight!