How to erase an iTouch and make like new

Granddaughter #1 has outgrown her iTouches.. moved on to an iPhone.. and has passed one of her iTouches down to Granddaughter #2. I'm trying to wipe the iTouch so that it does not contain any of #1 granddaugher's apps, songs or apple ID related stuff. I want to set it up as new. I have the password for her Apple ID and thought I would be able to just go into settings and wipe out all data and reset as new. I don't know which model iTouch it is, but it's running IOS6. When I do that, it asks for the restrictive passcode. Granddaughter #1 does not have any idea what it is. She gave me a bunch of potential 4 digit passcodes which I assume she had used at some point to password protect the iTouch, but in doing so, I suspect she accidentally set a restricitve passcode when she thought she was setting a general passcode. (There is no general passcode on it now when it boots up. Goes directly to the homescreen.) I am thinking at some point it is going to lock the iTouch if I try to plug in too many incorrect codes. I have gone to her iCloud account and I can see her iphone, ipad mini and an itouch.. but she had two itouches over the years so not sure I see the correct one. If I can decide if this is the correct one, would I be safe to just erase it? Does it have to be online to do that?
I also read on the internet that I can just connect the iTouch to iTunes and request iTunes reset and restore? Would that be an option in this case? I just want to clean it up and let granddaughter #2 play with it.
Or is it now dead for a second life unless we can figure out the restrictive passcode? ;-(
Appreciate your help....

Xenomorph said:

This should be really easy.

1) Connect to your computer.

2) In iTunes, click "Restore".

It will erase the device, make sure the OS is up to date, and set it up like new.

Click to expand...

That worked! Thanks. Made it like new and I will let my son finish up and add what he wants for her.