Factory Reset lost phone

It is not possible to remove Activation Lock from a phone without the Apple ID and password used to enable it. If you found it turn it in to the police or the lost and found for the place you found it.

The owner has the option to notify a finder that the phone has been lost. If they do this the phone must be powered on and connected to a network, either cellular or Wi-Fi. If they don't display a message on the screen while the phone is powered on and connected to a network there is nothing further you can do.

No. It doesn't belong to you. Turn it over to the police.

Failure to do so constitutes 'theft by finding'. It is a crime in most jurisdictions.