How to obtain true altitude from indicated altitude, temperature and QNH?
You need to correct your pressure altitude (FL85) for the barometer setting QNH first before you apply the temperature correction.
I assume a 30ft / hPa offset here:
$\textrm{barometric altitude} = \textrm{pressure altitude} + (\textrm{QNH} - 1013.25)\cdot 30 = 8500 -907.5 = 7592.5 \textrm{ft}$
Based on the pressure difference between sea level and your altimeter's measurement, the estimated altitude is 7592.15, assuming an ISA temperature profile.
Now, due to the fact that the actual temperature is lower, the atmosphere shrinks, and you end up flying lower.
Note that I will use -10° C for $\Delta_{ISA}$, because that was given in the question:

Outside Air Temperature: ISA - 10°

Now applying your correction formula yields:
$A_T = (4\times A_{Ik}\times\Delta_{ISA})+ A_I = (4 \times \frac{7592.5}{1000}\times -10)  + 7592.5 = -303.7 + 7592.5 = 7288.8 $
Rounding that to the nearest 50 ft results ins 7300 ft.
This is an approximation which is a bit on the low side. But underestimating true altitude is usually safer than overestimating.